How closing costs are catching homebuyers off guard
A survey from Ownright finds many Ontario buyers feel financially prepared until paperwork and closing costs arrive. Mortgage terms, title insurance and land transfer tax are common pain points.
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By Torontoer Staff
Many Ontario homebuyers report a sharp drop in confidence once the purchase paperwork begins, according to new research from Ownright. While 97 per cent said they felt financially stable before buying, nearly half found mortgage terms confusing and more than a third experienced moderate to significant stress from unexpected or unclear closing costs.
The findings point to a gap between general confidence and practical readiness. Buyers often focus on the sale price, down payment and monthly mortgage, but underestimate the one-time and short-term expenses that appear at closing.
What buyers are missing
Ownright calls the phenomenon a "financial literacy mirage": people feel ready but lack clarity on specific costs and legal terms. The survey highlights where confusion and stress are concentrated.
- 97% felt financially stable before starting the transaction
- 46% said mortgage terms were the most confusing part
- 37% reported moderate to significant financial stress from closing costs
- 41% said buyers need more education on total closing cost
- 29% wanted clearer breakdowns of final closing adjustments
The thing that stood out the most to me was the stark difference between how people felt going into the transaction versus when they were going through or had completed the transaction.
Robert Saunders, CEO of Ownright
Common components of closing costs
Closing costs add to the purchase price and can include mandatory and discretionary items. Many of these are one-time charges that buyers do not face again, which is why they can be easy to overlook during budgeting.
- Land transfer tax, provincial and municipal (Toronto charges a municipal land transfer tax)
- Legal fees and disbursements for the lawyer handling closing
- Title insurance, a one-time policy that protects against certain title defects
- Government registration fees
- Adjustments for prepaid property taxes, utilities or condo fees
- Any lender-required fees or mortgage-related charges
Title insurance deserves special attention. It protects against issues such as unpaid liens, fraud, survey mistakes or competing claims on the property. Most lenders require title insurance, and even when they do not, Ownright recommends it because it can prevent substantial future costs.
Where buyers look for answers, and why that can fall short
Online research is the most used source of information when buyers try to understand closing costs, with 39 per cent turning to the internet. However, only 6 per cent said online sources were their most trusted resource. By contrast, 51 per cent said their lawyer is the most trusted source, yet only 25 per cent learned about closing costs from a lawyer and 20 per cent from their real estate agent.
I was lucky because my mortgage specialist was very detailed and spent a few hours with me to explain all the costs, and Ownright, my lawyer, gave me a quotation at the beginning so there was no surprise on closing day.
Phuong Vo, recent homebuyer in Mississauga
How to avoid surprises
Practical steps early in the process reduce the chance of unexpected expenses and last-minute stress. The key is to ask for clear, written numbers and to build a team you trust before you sign a purchase agreement.
- Ask your lawyer and mortgage specialist for a written estimate of closing costs as soon as you have an agreement in principle
- Budget for land transfer tax and add a buffer for smaller adjustments that add up
- Confirm whether your mortgage lender requires title insurance and get a quote for it
- Request a detailed breakdown of final closing adjustments well before closing day
- Use online calculators for quick estimates, but verify figures with a lawyer or broker
- Build a support team: a real estate agent, mortgage broker and lawyer can each flag different risks
By the numbers
- 41% of survey respondents said buyers need more education to understand total closing cost
- 25% said buyers need better guidance on budgeting after purchase
- 21% wanted more support managing debt and credit before buying
- 29% wanted clearer breakdowns of final closing adjustments
Closing costs are a normal part of buying a home, but they are also predictable if you ask for the right information early. A written estimate from your lawyer and conversations with your mortgage professional can prevent the stress many buyers report when the paperwork starts to arrive.
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