Nerdy Tip: When using our closing costs calculator, be sure to specify which province you expect to buy a home in so we can accurately estimate the amount of land transfer tax you might have to pay.
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Closing Costs Breakdown
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What are closing costs when buying a house?
Closing costs are the one-time, up front charges you pay before taking possession of a recently purchased home. They are not included in your mortgage costs.
The closing costs you’re required to pay depend on several factors, including the type and price of the property you buy, your down payment amount and where your home is located.
Closing costs can add thousands of dollars to a home’s overall purchase price. Knowing how many different charges you could pay — and what they might add up to — is a critical step when creating a home buying budget.
How do you calculate closing costs?
It’s relatively simple to calculate closing costs. You just add up all the fees you’re expected to pay on the day you close on your home.
That can be a challenging task if you don’t know which costs to include. It’s worthwhile to familiarize yourself with both common closing costs and those you may only encounter in certain scenarios.
Common closing costs
Land transfer taxes
Each province charges some form of land transfer tax when property changes hands. It might be called a “land transfer fee”, a “property transfer tax”, or a “deed transfer tax.” It’s going to cost you no matter what your province chooses to call it.
Land transfer taxes vary from province to province. A $500,000 property, for example, would cost you hundreds of dollars in land transfer fees in Alberta, but thousands in land transfer taxes in Ontario.
Legal fees
Hiring a real estate lawyer is an inevitability when buying a home. You’ll have to pay your legal fees in full before the home purchase can be completed.
The total cost of these fees will depend on the going rate for lawyers in your community and the amount of work your transaction requires. Expect to pay several hundred dollars — or much more if your lawyer covers the cost of add-ons like title insurance and bakes it into their fees.
Home appraisal fee
Your lender will likely require you to have your home appraised by an independent third party before signing off on your mortgage. An appraisal establishes that the home you’re buying is worth the offer you made.
Home appraisals in Canada generally cost between $300 and $500.
Moving costs
While not strictly a closing cost, moving costs also have to be built into your budget. The cost of a move will vary depending on how many items you’re moving and how far you’re trucking them. Get a quote from a reliable, licensed mover to ensure you set enough cash aside.
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Possible closing costs
Home inspection
Home inspections aren’t mandatory, but getting one can uncover hidden defects that a seller either didn’t disclose or wasn’t aware of.
Buyers foot the bill for home inspections, so you’ll have to pay if one is included as a condition of your offer. The cost will depend on the size, age and location of the home, but often ranges between $400 and $700.
Estoppel certificate fee
This is a fee your lawyer will require if you’re buying a condo or strata unit outside of Quebec. An estoppel certificate confirms important details about a condo unit, including any outstanding fees that you might be responsible for.
Obtaining an estoppel certificate could cost a few hundred dollars.
Provincial sales tax on mortgage default insurance
If you buy a home with a down payment below 20% of the purchase price, you’ll be required to buy mortgage default insurance. You’ll also have to pay provincial sales tax on your insurance premium in Saskatchewan (6%), Ontario (8%) and Quebec (9%).
If you have the cash handy, you can treat your entire mortgage default insurance premium as a closing cost and pay it off up front. That’ll prevent it from being added to your mortgage and costing you more in interest charges.
GST/HST on new construction
Unless it’s included in your builder’s sale price, you may have to pay goods and services tax (GST) or harmonized sales tax (HST) on the cost of your newly constructed home at closing.
Land survey fee
Land surveys aren’t as common as home inspections, but your lender may require you to get one to confirm a property’s boundaries or other factors that could impact its value.
A land survey could cost thousands of dollars. The total cost will depend on the size of your lot, the reason for your survey and how labour- and research-intensive the survey is.
Property taxes
It’s unlikely that you’ll have to pay property taxes at closing. But if the previous owner paid the property tax for the entire year and needs to be reimbursed for the time you’ll be living in the house, you’ll be the one squaring things up.
Home insurance
Your lender will require home insurance to be in place before you can close. Depending on your insurance provider, you may have to make a lump-sum payment before coverage begins.
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Who pays closing costs?
Buyers typically pay most, if not all closing costs when buying a house in Canada. Closing costs are usually paid to your lawyer, who is responsible for disbursing them.
There are some instances where a motivated seller might agree to pay some of a buyer’s closing costs, or where a lender agrees to pay for a home appraisal. It never hurts to discuss these possibilities with your real estate agent or mortgage broker.ns.
How much are closing costs?
Because closing costs vary from transaction to transaction, it’s difficult to estimate the actual dollar amount you could pay. It’s generally best to have 3% to 5% of a home’s purchase price on hand when it’s time to close. If you buy a $500,000 home, for example, you might need an additional $7,500 to $25,000 to cover the closing costs.
Your down payment can also be considered a closing cost, but it is not included in that 3-5% figure.
Why do closing costs vary?
Closing costs can vary for several reasons, mainly because of location and property type.
Each province levies its own tax on property transfers.These taxes can range from hundreds of dollars in some provinces to thousands of dollars in others. You’ll pay both a provincial and a municipal land transfer tax if you buy a home in Toronto.
The property you buy also plays a significant role in your closing costs. A larger property could require a more expensive appraisal, and its higher sale price would likely result in more expensive land transfer taxes.
Tips for reducing closing costs
Closing costs are inevitable, but there are ways you can try to make them more affordable, such as:
- Making a down payment of at least 20%. You won’t have any mortgage default insurance premiums to pay tax on.
- Negotiating with the seller. If a seller is particularly motivated, they might agree to pay some of your closing costs.
- Comparing lawyers. Don’t start working with the first real estate lawyer you call. Find out what a few different lawyers charge, both by the hour and for carrying out different tasks.
If you’re worried that closing costs might add up to more than you can afford, consider using the Home Buyers’ Plan (HBP), which allows you to borrow up to $35,000 from your RRSP to put toward a home purchase. These funds don’t need to be put toward a down payment. You can use them for closing costs, too.
Frequently asked questions about closing costs
Closing costs vary based on many factors, but you’ll generally want to set aside 3% to 5% of a home’s purchase price to cover all potential closing costs. On a $400,000 home purchase, for example, the closing costs could range from $6,000 to $20,000.
In some cases, you might be able to negotiate your closing costs so the seller or lender assumes certain expenses. A seller might, for example, agree to pay for a home inspection. A lender might pick up the tab for an appraisal.
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