What are closing costs?
- Definition of Closing Costs
Closing costs are the additional costs required once a home purchase is finalized. Closing costs can include various legal fees including disbursements, land transfer fees, property taxes, real estate agent commission fees, as well as moving and utility hookup costs.
Why is this term important?
Closing costs are expenses on top of the price of the home. That means the selling price of a property does not include these closing costs, which are paid after the sale of a home is finalized. Most closing costs are all due on the closing date (which is why these costs are known as "closing costs"). The total amount of all closing costs varies, but a rule of thumb is to budget between 2% to 4% of your purchase price to pay for closing costs.
Examples of term
If you buy a home for $600,000, you should budget between $12,000 and $24,000 in closing costs. These extra fees would include $10,000 in land transfer taxes, $2,000 in legal fees, as well as any costs associated with utilities and moving.