Buying a Home? A Guide to Closing Costs in Canada

Buying a home can be stressful and comes with a number of costs. Knowing what to expect from closing costs in Canada will give you peace of mind.

There are two parts to this:

Before you Close

Before you close on your mortgage, expect to pay the following:

1. A home inspection fee. These run between $300 and $500. It is sometimes possible to convince the seller to cover this fee, but not always.
2. A deposit. Most sellers require a deposit when you make an offer to purchase. Fortunately, this deposit counts towards your down payment. For homes that cost up to $500,000, the minimum down payment is 5% For homes that cost more than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance.

When you Close

When you close, you will need to pay several other costs:

1. Land Transfer Tax. This is a percentage of the purchase price of your home, and is payable to the province. Some cities also charge LTT.
2. Legal fees. A typical closing will run you about $500 per transaction in legal fees.
3. Mortgage default insurance or CMHC insurance. This is generally included in your mortgage payments, and is required if your down payment is less than 20 percent. You will also have to pay sales tax on the insurance at closing.
4. Title insurance. Most lenders require that you get title insurance, which protects them if there is an ownership dispute. Usually this is handled through your lawyer and runs $100 to $300.
5. Appraisal fee. Fortunately, this is often covered by the lender, as it is being done for their benefit to help ensure that they know the resale value.
6. Some properties may have other fees. For example, if you have a septic tank or a well, both should be tested before you take possession. Sometimes the seller will pay this. If you are buying a condo, outside of Quebec, you may have to pay a certificate fee of up to $100.

In total, you should budget between 3 and 4 percent of your purchase price for closing costs. Compared to the price of the home, this is a small amount, but not being ready for it can cause you problems. For more help understanding closing costs and how they break down, contact us today.