Closing costs are one-time fees that the buyer of real estate must pay when they decide to purchase a property. Closing costs are an umbrella term for the many various fees related to purchasing a home. These costs include, but are not limited to: land or property transfer taxes, lawyer fees and inspection fees. In most cases, they have to be paid upfront and cannot be rolled into your mortgage. Generally, it is a good idea to budget between 3% and 4% of the purchase price of a resale home to cover closing costs. Find out your closing costs using our calculator below and prepare a realistic budget in advance to avoid unexpected surprises down the road.
Closing costs are essential expenses to consider when planning for your home purchase. If you are not prepared for them, they can add up and greatly burden your financing. We strongly encourage you to consider all of these costs; be prepared to pay between 3% and 4% of the purchase price to cover them.
Land transfer tax along with lawyer and legal fees make up the majority of closing costs. For higher property values, land transfer tax could cost upwards of $10,000. Other costs associated with closing can be expected to be much smaller. Overall, we suggest preparing for all these expenses when budgeting for your new home, as these closing costs are usually mandatory for all home-buyers.
When you buy a property, you must pay a land transfer tax to the provincial government and, in some areas, the municipality. The amount of the land transfer tax depends on the value of your property and varies greatly by province. This tax for most Canadians is based on the purchase price of their property. You can calculate your land transfer tax using our Land Transfer Tax calculator.
First-time homebuyers in Ontario, Prince Edward Island, and British Columbia are able to benefit from land transfer tax rebates. As an example: on a $500,000 home in Toronto, first-time buyers would save $8,475.
Buying a home is a legal process that requires a real estate lawyer to act for you in the purchase and mortgaging of the property. In some provinces, such as Ontario and Alberta, it is mandatory to have a lawyer. Legal fees vary with the amount and difficulty of the work required, but the cost can be anywhere between $500 and $1,500 including tax.
Both your mortgage provider and your lawyer require a current property survey certificate on the home and the cost is typically part of the legal fee. If the certificate does not reflect additions and improvements to the property and your lawyer is not covering the cost, then your real estate agent should negotiate with the other agent as to who will cover the expense of a new certificate. The cost varies by location, type of survey, type of property, and geographical and legal complications. Overall, the general range can be expected to be between $350 and $600.
It is highly recommended that you make your purchase offer conditional on a positive home inspection by a professional home inspector. The inspection will catch any hidden problems in the home that could have future consequences or be expensive to repair. This is especially important for a freehold property in comparison to a condo or apartment, as you will be responsible for all future costs of the property. The inspection fee is generally around $500, but it could save you thousands if not more in repairs versus having discovered the home’s flaws after you’ve signed the contract. Sometimes, you can ask the seller to give the maintenance costs as a credit or discount to the original agreed-upon sale price or even cancel the contract if the inspector finds a huge problem.
The mortgage lender usually requires a property appraisal from a professional appraiser to confirm that the selling price of the home is reasonable for the market and to determine how much they are willing to lend. Your lender may arrange the appraisal themselves and may even pay for it. The cost is usually between $300 and $500 depending on location. We encourage you to always try to negotiate with a lender to waive this charge as they will often waive it to bring you on as a new customer.
The word “title” in title insurance describes your legal ownership of a property and its land. Your lender may ask you to obtain title insurance in case there is a dispute about such ownership revolving around whether you own the property or if part of your property is on your neighbour’s land. You can purchase this insurance through your lawyer as a one-time premium. Cost varies depending on the insurance company, but is usually around a few hundred dollars. .
Your lawyer will pay registration fees when they file official documents on your behalf with various government departments. Registration fees vary by document, property type, region, and province. Your lawyer may include these costs in their overall fee or give you a list of these additional fees when you hire them. The average total for all registration fees can be around $200 but you should contact your lawyer for a more accurate estimate.
You will need an Estoppel certificate if you are buying a condominium or condo apartment. The certificate is a legal document that comes with the financial statements of the condo board, outlining all common fees associated with your unit and the services you will receive in return. It also lays out all the penalties for any infractions of the condo rules. If there are any disputes in regards to the conditions outlined above, the Estoppel certificate can be used in a legal capacity to remedy a situation. The Estoppel certificate usually costs around $100.
Some closing costs are difficult to estimate as they depend greatly on your location and particular circumstances.
If you plan to buy a home with a down payment of less than 20%, you must buy CMHC Insurance. The closing cost associated with CMHC mortgage insurance all depends on where you live. If you live in Manitoba, Québec, Ontario, or Saskatchewan you must pay a provincial sales tax on the CMHC premium at the HST/PST/GST rate applicable to your province.
If you are not a citizen or permanent resident of Canada but are purchasing a home, Non-Resident Speculation Tax may apply to you. The most significant taxes can be found in Ontario and British Columbia. If you decide to buy a home in the Greater Golden Horseshoe Region near Toronto, Ontario, you must pay the NSRT. This tax is equal to 15% of the value of the property. You can obtain a full rebate of the NRST if you stay in Canada by becoming a permanent resident within four years of purchase, enrolling full-time as an international student for two years after purchase, or working as a foreign national in Ontario for one year after purchase.
A similar 20% foreign-buyers tax is also applied to foreign buyers in British Columbia: if the home buyer is a foreign national, foreign corporation, or a taxable trustee, a 20% Property Transfer Tax must be paid. In rare cases, if the property was transfered prior to February 20th, 2018 the PPT fee only amounts to 15%. The areas in BC that require the additional tax are:
However, foreign nationals who have work permits from the BC Provincial Nominee Program are exempt from this additional tax.
When you purchase newly built or heavily renovated housing, you will have to pay a sales tax on top of the purchase price. This sales tax consists of a federal portion and a provincial portion. In some provinces they are kept separate while in others, they are combined and called the Harmonized Sales Tax (HST). However, this cost does not always apply to the home-buyer. The GST/HST almost always applies to new constructions but the cost may not have to be paid by the home buyer as the builder may cover the cost. If you are unsure, contact your seller or lawyer to determine whether GST/HST applies to you.
If the price of your new home is less than $450,000, you may be eligible for the GST/HST New Housing Rebate. This allows you to take back some of the federal portion of the tax (GST) and, in select provinces, the provincial part of the tax as well. The rebate consists of two types available with differing rates: a rebate for owner-built houses and a rebate for housing purchased from builders. You can ask your lawyer for details regarding the full conditions of eligibility.
You may have to pay an interest adjustment depending on the day of the month on which you close your purchase. For example, the closing date of your purchase is August 2nd, so your lender advances your mortgage on that day to the selling party. But your first mortgage payment is not due until August 15th. From August 2nd to August 15th, interest accrues on your mortgage. The interest accrued over those 13 days will be the interest adjustment that you will need to pay as closing costs to your lender. The amount will depend on your mortgage terms and the length of time remaining in the month before your first mortgage payment; you can contact your lender for specific details.
If you are buying a resale home, the previous owner will likely have already paid property tax for the year. You may need to reimburse a portion of the tax to the previous property owner. The amount repaid will depend on the property tax amount and the length of time remaining until the end of the year. You can calculate the home's property tax using the WOWA Property Tax Calculator, but please contact your lawyer for specific details.