Closing costs are one-time fees that the real estate buyers must pay when they decide to purchase a property in Canada. 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 the closing costs. Find out your closing costs using our calculator below.
The purchase price of your home.
The amount paid upfront. In Canada, the minimum down payment is 5%. Mortgage default insurance (commonly referred to as CMHC insurance) is required for down payments under 20%.
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.
Some closing costs are difficult to estimate as they depend greatly on your location and particular circumstances. We’ll take a look at the different types of closing costs below, as well as give a rough estimate of how much they will cost.
The majority of closing costs are made up of land transfer tax and legal fees. Land transfer tax can cost thousands of dollars depending on the value of your property. Other costs associated with closing can be expected to be much smaller, but they can still add up. Overall, we suggest preparing for these expenses when budgeting for your new home, as these closing costs can be significant.
When you buy a property, you must pay a land transfer tax to the provincial government and, in some areas, the municipality too. 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. Some provinces might have marginal land transfer tax rates, with a higher tax rate the higher the purchase price. while others might have a flat land transfer tax rate. 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.
The below closing costs are also common in Canada. Some of these costs might already be covered in some cases, such as some lawyers bundling government registration fees into their legal fees, or sellers providing an up-to-date property survey. If they’re not already included, then be prepared to pay for them.
Both your mortgage provider and your lawyer require a current property survey certificate on the home. If the certificate that the seller provides does not reflect additions and improvements to the property, or if they are unable to provide one, then you may need to cover the cost of a new property survey. The cost varies by location, type of survey, type of property, and geographical and legal complications. Overall, the cost of a property survey can be expected to be between $1,500 and $6,000.
It is highly recommended that you make your purchase offer conditional on a positive home inspection by a professional home inspector. A home 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 repair 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 $600 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. Another method of appraising your property is a comparative market analysis (CMA), which your real estate agent can complete for you.
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. The cost varies depending on the insurance company, but it 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 outlines 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 unpaid fees, or if there is any pending litigation. 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.
There are a few ways to save on closing costs when buying a home in Canada.
If you plan to buy a home with a down payment of less than 20%, you must pay for CMHC Insurance. Alternatively, you can buy mortgage default insurance from private insurers Sagen or Canada Guaranty. Only the sales tax on the insurance premium must be paid upfront, and so this closing cost calculator only considers the sales tax portion as a closing cost. The insurance premium itself can be added to your mortgage balance.
The closing cost associated with CMHC mortgage insurance all depends on where you live, how much you’re borrowing, and your down payment amount. CMHC insurance premiums can be in the thousands of dollars. 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’re making a down payment of 20% or more, you won’t have to pay for mortgage default insurance, and so it won’t be part of your closing costs.
If you are not a citizen or permanent resident of Canada but are purchasing a home, Non-Resident Speculation Tax may apply to you. This tax can be found in Ontario and British Columbia. Additionally, Canada’s Prohibition on the Purchase of Residential Property by Non-Canadians Act has banned foreign nationals from buying a home in Canada for two years, starting in 2023.
If you decide to buy a home in Ontario and you are not a citizen or permanent resident, then you must pay the NRST. This tax is equal to 25% 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 transferred 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, the length of time remaining in the month before your first mortgage payment, and your mortgage rate; 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. Similar adjustments could be made for prepaid charges that the previous homeowner has paid for, such as utilities.