What Happens on Closing Day and What to Expect

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For first time home buyers, closing day can be pretty daunting. It’s a big step, whether you are buying your first family home, first investment, or even just in need of a change. The process of buying a home isn't something many are taught growing up. This can lead to the buyer having many unanswered questions, or even not knowing what questions they should be asking. For starters, closing day in particular often uncovers some of those uncertainties. There can be a lot of insecurities about how to handle such a large purchase such as being unprepared or uneducated about most of what goes down on that final day in escrow. We want you moving into this new chapter of your life with the confidence and reassurance that you made this step properly.

How to be Prepared

Prepare, prepare, prepare. Buying a home is not something to be taken lightly. Educate yourself on costs, payment plans, insurance policies, inspection rates and what suits your needs best. We want you going into closing day with no surprises.

Documentation and Inspections

For starters, double check your documents. Go over loan documents, disclosure forms, insurance, inspection results and any other paperwork given to you by your realtor or mortgage broker. Check for errors such as misspelling, grammatical errors or miscommunications. A common mistake often made by first time buyers is overlooking the need for a home inspection prior to closing day. Don't make this mistake, having your future home professionally inspected ensures complete confidence in your purchase and proves that you know exactly what you are getting yourself into. In some cases, an inspection may also give the buyer the chance to rethink their decision or have any damages fixed before buying. For instance, if the inspector finds hidden damage, broken appliances and so on, the buyer may have the right to demand repair or renegotiate or terminate the transaction. This would usually depend on various clauses that could be written into the Agreement of Purchase and Sale.

Uncover Hidden or Undisclosed Costs

Deposits

  • The Down Payment: the downpayment is a portion of the home’s purchase price that is paid at the buyers own expense and does not come out of any loan.
    Typically, a downpayment ranges between 5% and 20% of the total cost of the home. Any of our mortgage brokers would be more than happy to speak with you about the specifics of your down payment in order to ensure that you understand how and why the percentage varies between housing costs. Remember, understanding where your money is going and why it is going there while buying a home provides comfort after such a large purchase.

Land Transfer Tax

  • A calculated based on a tiered percentage of the purchase price of the house.
  • It may be required to be paid on closing day but often varies between provinces and sometimes even cities.
  • In Ontario, the percentage doesn't exceed 2.5% of the home price, except for homes being purchase in the city of Toronto where there is an additional municipal land transfer tax to be paid.

Use our Land Transfer Tax Calculator to help understand how much land transfer tax you might be expected to pay on the purchase of your property.

Property Insurance

  • Protects you in the event that your property or its contents are damaged. It also covers the homeowner in the instance that someone is hurt or injured within your home and protects you of the liability to a degree.
  • This could either be paid on closing day in full, or annually through a payment plan.

Title Insurance and Appraisal Fees

  • Protects the buyer in regard to any possible losses in the event that there is a dispute over property ownership. Title insurance should be thoroughly discussed with a notary or with a lawyer.
  • You may be required to pay for the property’s appraisal. Speak with your real estate agent or mortgage broker about this to confirm if this applies to you and how the price varies for different appraisal types and companies.

Property Taxes

Inspection Fees

  • This is dependent on whether or not you want a professional home inspection. This is recommended for most homebuyers, however, if you decide to go with a professional inspection it will be at your own expense.
  • Consider the pros when making this decision and how a professional inspection can save you money in unexpected long-term repairs. It can also help ensure that you are fully informed on the advantages as well as the liabilities the property might have.

What to Expect Once you get There

Closing day is the finale. You're making it official and the long treacherous process of documents, fees, lawyers, and waiting is over. The house is yours! On this day funds will be transferred from the buyer to the seller which is done by a lawyer or a notary. Funds including mortgage and title fees are transferred from escrow and the deed is updated. Although this can be a very stressful day for some, don't forget the reward for all of your hard work. In all of the commotion don't forget to bring all of your paperwork including home insurance, cashier or certified checks and your government issued photo ID.

Problems to Look out for

Surprises During the Final Walkthrough

  • During the final walkthrough of the house before closing (that typically takes place the final week before closing day) buyers may find the house to be in an unfit or unexpected condition below their standards.
  • This could include missing appliances, failing to finish repairs that were agreed upon etc.

Mortgages and Finances falling through at the last Minute

  • Hypothetically if the buyer loses their main line of income before closing day or suddenly acquires a large amount of debt during this time, then their mortgage could be questioned for their ability to keep up with annual payments and financial negotiations could restart.
  • This could also be a result of outstanding debts coming out of the woodwork or hidden finances.
  • Try your hardest to ensure that you keep your debt levels and income sources consistent and close to the same levels that enabled you to get approved for your mortgage.

Issues Surrounding Official Documents

  • Including incorrect middle names, spelling or grammar errors, incorrect addresses or extra fees that the buyer was unaware of.
  • Could also consist of missing forms or contracts.

Buyers/ Sellers Remorse

  • Last minute cold feet and someone pulling out of the deal.
  • Could be a change of finances or simply just a general sense of anxiety over such a large purchase or major life change.

Quick Asks and Frequently Asked Questions (F.A.Q.)

How Many Days Before Closing Do You Get Mortgage Approval?

Can I Move In On Closing Day?

Technically, yes, however you may not want to rely on this move-in-date. As the move-in-date is agreed upon between the buyer and the seller, the two can agree to have the new owners move in after the papers have been signed. In the event that problems arise on closing day that prevent the buyer to become the property’s current owner, the buyer would have a pretty urgent housing issue and may need to seek alternative living arrangements temporarily if they already relinquished the rights and moved out of their previous residence. In this case, the buyers might even need to pay for storing their belongings and any furniture that was on a moving truck, plus reschedule another moving truck if needed for a future date.

What Happens if my Mortgage Falls Through on Closing Day?

If your mortgage falls through on closing day the buyer has a couple options

  • Including:
    • Applying for an emergency mortgage loan or private mortgage loan through a mortgage broker
    • Asking the sellers to extend the closing date (which could include some additional financial compensation from the buyers to the sellers)

To learn about more options that can help you in the event of a lastminute mortgage delay of cancellation, have a look at the information on our Emergency Mortgage page.

We know closing day can be intimidating. You should have all of the tools you need to walk into closing day with confidence and be aware of what to expect and how to expect the unexpected. That is why our knowledgeable and experienced licensed mortgage brokers would be more than happy to answer any of your questions and help find a mortgage plan that will work for you. Our goal is to make sure that you enjoy being able to walk into this new chapter with pride knowing that you made the right decision for this next step in your life.

Resources

https://www.ontario.ca/page/property-tax#municipal_tax
https://www.ontario.ca/page/list-ontario-municipalities
https://www.amfam.com/resources/first-time-home-buyers-guide/what-to-expect-on-closing-day
https://bridgewellgroup.ca/what-happens-on-closing-day-when-buying-a-house/
https://www.homelight.com/blog/what-can-go-wrong-at-closing/
https://clovermortgage.ca/blog/5-reasons-a-bank-can-deny-your-mortgage-application-after-pre-approval/
https://clovermortgage.ca/emergency-mortgage/
https://blog.embracehomeloans.com/the-repercussions-of-a-mortgage-not-closing-on-time/
https://www.whichmortgage.ca/mortgage-guide/what-happens-on-closing-day/324887
https://www.mortgageingenuity.ca/index.php/blog/post/260/your-house-closing-timeline-a-step-by-step-guide-%7C-ontario

Steven Tulman
Written By Steven Tulman
“Making the process of getting a mortgage an easy and enjoyable experience for every Clover Mortgage client!”