Closing Costs Create Financial Stress for Ontario Homebuyers, New Survey Reveals

Even financially prepared Ontario homebuyers are being caught off-guard by the fine print of homeownership, according to new research from Ownright, a Toronto-based digital real estate law platform. The findings expose what the company calls a "financial literacy mirage" where confidence doesn't always equal comprehension when navigating the complex process of purchasing property.

The Confidence Gap in Home Purchases

"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," says Robert Saunders, CEO of Ownright. "The survey told us 97 per cent of people felt they were financially stable going into the purchase but as soon as the paperwork started to happen, confidence began to drop."

The research reveals that 46 per cent of respondents said mortgage terms were the most confusing aspect of the homebuying process, while 37 per cent reported experiencing moderate to significant financial stress due to unexpected or unclear closing costs.

Understanding Closing Costs

Many homebuyers focus primarily on the purchase price of the property, their down payment, and mortgage payments while neglecting to research closing costs thoroughly. These additional expenses can include:

Provincial land transfer tax
Municipal land transfer tax (for Toronto purchases)
Title insurance
Legal fees
Government registration fees
Property adjustments for prepaid taxes, utilities, or condo fees

Saunders notes that many homebuyers haven't budgeted sufficiently for land transfer tax specifically, explaining that "it's a really big chunk in terms of cost and can be many thousands of dollars but certainly the small expenses do add up."

The Importance of Title Insurance

Closing costs may also include title insurance, a one-time purchase that protects homeowners from certain problems with the legal ownership of their property. This insurance can cover issues like unpaid liens, fraud, survey mistakes, or someone else claiming a right to the property.

Your lawyer typically arranges title insurance during the closing process, and once purchased, it lasts for as long as you own the property. While most lenders require it for mortgages, Ownright strongly recommends it even when not mandatory because it can prevent significant costs and legal complications in the future.

Information Sources and Trust Gaps

According to the Ownright survey, online research was the top source of information for understanding the financial side of closing (39 per cent), though just six per cent said it was their most trusted source.

"That tells us that people want answers fast and don't want to bother their real estate agent, their real estate lawyer or their mortgage broker," Saunders observes.

By contrast, just one in four homebuyers learned about closing costs directly from their lawyer and one in five learned from their real estate agent, despite 51 per cent saying their lawyer is their most trusted source for reliable financial information.

First-Time Homebuyer Experience

Phuong Vo, who recently purchased her first home in Mississauga, shared a positive experience. "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 and everything matched exactly so there was no surprise or shock on closing day."

Proactive Advice for Homebuyers

Saunders advises homebuyers to ask questions about closing costs early in the homebuying process. "Often times people don't have those relationships early enough in their home ownership journey," he says.

"At Ownright, many people don't come to us until they have a signed, sealed agreement but it would pay dividends if they reached out to us to get opinions or ask questions earlier. I also advise people to surround themselves with a team to help them in their homebuying journey."

He emphasizes that "a real estate lawyer and real estate agent can provide you with proactive education and some of the things to watch out for on what's going to be one of the biggest financial investments of your life for most people."

Additional Survey Findings

The Ownright survey also revealed that:

41 per cent say buyers need more education to understand total closing costs
25 per cent say they need better guidance on budgeting post-purchase
21 per cent say they need more support managing debt and credit before buying
29 per cent want clearer breakdowns of final closing adjustments for utilities, taxes, and credits

For sellers, closing costs typically include legal fees, real estate commission, mortgage discharge fees (if applicable), and adjustments for property taxes or utilities covering any prepaid amounts.