Closing Costs Explained: What Buyers and Sellers Actually Pay

Buyers typically pay 2 to 5% of the purchase price in closing costs. Sellers pay 5 to 8%, mostly agent commissions. On a $400,000 home, the buyer pays $8,000 to $20,000 and the seller pays $20,000 to $32,000. These costs are separate from the down payment and catch many first-time buyers off guard. Use the [closing cost calculator](/calculators/closing-costs) to get a personalized estimate.

Buyer closing costs in the US include: loan origination fee (0.5-1% of loan = $1,600-$3,200 on $320K), title insurance (0.5-1% = $2,000-$4,000), appraisal ($400-$600), home inspection ($400-$600), attorney fees ($1,000-$2,500), recording fees ($100-$300), prepaid property tax (2 months = $500-$1,500), prepaid homeowners insurance ($1,000-$2,000), escrow fees ($500-$1,000). If down payment is under 20%, add PMI first month ($100-$300).

Canadian buyer closing costs are different because of land transfer tax. In Ontario, land transfer tax on a $500,000 home is approximately $6,475 — and in Toronto, you pay both provincial and municipal LTT totaling $12,950. In Quebec, the Welcome Tax (mutation tax) on a $500,000 home is approximately $5,500. In BC, the property transfer tax is approximately $8,000. Alberta and Saskatchewan have no land transfer tax at all. Canadian buyers also pay: lawyer/notary fees ($1,000-$2,500), title insurance ($250-$500), home inspection ($400-$600), and appraisal ($300-$500).

Seller closing costs are dominated by agent commissions. In the US, the traditional 5-6% commission (split between buyer and seller agents) on a $400,000 home is $20,000-$24,000. Since the 2024 NAR settlement, commissions are more negotiable — many sellers now pay 4-5% total. In Canada, commissions are typically 4-5% total. Other seller costs: attorney fees ($500-$1,500), transfer tax (varies by state, 0.5-1%), mortgage discharge fees ($200-$400).

Ways to reduce closing costs: negotiate the origination fee with your lender, shop for title insurance (prices vary 30%+), ask the seller to contribute toward closing costs (common in buyer markets), look into first-time buyer assistance programs, and consider lender credits (accept a slightly higher rate in exchange for lower upfront costs). For Canadian first-time buyers, Ontario offers an LTT rebate of up to $4,000, and Toronto adds $4,475. Use the [down payment calculator](/calculators/down-payment) to factor closing costs into your total savings target.

Frequently Asked Questions:

Can closing costs be rolled into the mortgage? Partially. Lender credits and seller contributions can reduce upfront costs. Some loan types allow financing certain fees. But you still need cash for down payment and some costs.

When are closing costs due? At the closing table, typically 30-45 days after offer acceptance. You receive a Closing Disclosure 3 business days before closing with final numbers.

Who pays closing costs, buyer or seller? Both pay different costs. Buyers pay lender and insurance fees. Sellers pay agent commissions and transfer taxes. In negotiations, either side can agree to cover some of the other's costs.