Hannah Logan
Kurt Woock
Beth Buczynski
So, you’ve bought a home. Your offer has been accepted, the mortgage approved, and the down payment has been handed over. This means you are ready to go, right? Well, not quite yet. You still have to deal with the closing costs.
What are closing costs?
Closing costs are the legal and administrative fees you will need to pay when the deal on your home purchase closes. They are a one-time fee, but there are multiple costs to be aware of and they do add up rather quickly, so it’s important to factor them into your budget before making an offer on the house you want. Some closing costs are optional; however, many are mandatory.
How much are closing costs?
Expect closing costs to equal 1.5%-4% of the purchase price of the home.
So, if you are buying a home for $400,000 then your closing costs will add an additional $6,000-$16,000.
This is a pretty significant sum, which is why you need to take closing costs into consideration when making an offer and figuring out your down payment. The actual amount of your closing costs will depend on several factors, including where you live and what kind of home you are buying.
To get specific about your home-buying budget, use a closing costs calculator.
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Common closing costs in Canada
Closing costs is the umbrella term for a group of expenses you must pay when you buy a home. Some are mandatory, some are optional, and some may be specific to your situation. Here’s a quick breakdown of the types of closing costs you may be responsible for.
Home inspection
Cost: The cost for an inspection depends on the age, location and size of the home. As one example, expect to pay between $300 and $600 in Ontario.
What it is: A home inspection is a professional evaluation of a home’s condition. For example, if the roof has a leak, you’ll want to know about it before you buy. These types of things can impact your decision to buy the house and impact how much you are willing to offer. A home inspection is optional in Canada but usually recommended.
Property appraisal
Cost: Between $300 and $500.
What it is: A home appraisal will likely be ordered by your mortgage lender before your loan is fully approved. The appraisal serves as an estimate for the overall market value of the property you are buying.
Property survey
Cost: Between $1,000 and $2,000.
What it is: A property survey identifies the property’s boundaries and identifies any buildings or factors that may impact the overall value of the property. Often, the lender will ask you to provide an up-to-date property survey upon mortgage application. If you are lucky, the seller will have one they can give you. If not, you can hire a professionally licensed land surveyor to do one.
Title insurance
Cost: Plan to spend between $150 and $300.
What it is: Title insurance protects you and the lender from challenges to ownership that might result from real estate fraud as well as municipal work orders, zoning violations and any other property defects. Typically, your lawyer will take care of this for you and include the cost in the legal fee you’re charged. Title insurance is a one-time cost; you won’t pay ongoing premiums, like property insurance.
Property insurance
Cost: The actual amount can vary widely, but $100 per month could be a reasonable placeholder until you get a quote.
What it is: Property insurance, often called home insurance, is required and must be in place before your lender will advance funds. Your monthly premium depends on many factors, including the likelihood of severe weather events in your area, your claim history and the age of your home’s electrical system.
Mortgage default insurance
Cost: Typically between 0.6% and 5% of the loan amount.
What it is: If you have less than 20% for a down payment on your home, you will need mortgage default insurance. The closer your down payment is to 20%, the lower your mortgage insurance rate will be. The amount is usually added onto the mortgage loan, but any provincial sales taxes charged on the mortgage default insurance must be paid in full at closing.
Land transfer tax
Cost: Usually a percentage of the purchase price of the home. Use a land transfer tax calculator for specifics.
What it is: Land transfer tax (LTT) is charged on properties across Canada. Each province has its own LTT and some municipalities (such as Toronto) also have LTT. If you are a first-time home buyer, you may get some of this cost rebated.
GST or HST
Cost: Variable.
What it is: If your home is a new construction, then you may be subject to GST or HST, although this amount may already be covered in the builder’s sale price. If not, you’ll have to pay it at closing. You might also qualify for a new housing rebate.
Property taxes, utilities and condo fees
Cost: Variable.
What it is: If the seller has prepaid for any property taxes, utility bills or condo fees, you will need to reimburse them part of the costs starting from when you take ownership of the property.
Legal fees and disbursements
Cost: Between $400 and $2,500.
What it is: Legal and disbursement fees are any expenses charged by your lawyer as well as any expenses or fees they had to pay on your behalf while working for you. In other words, if your legal fees are high, they may be offset by not paying other closing costs listed in this article directly. Conversely, if your legal fees are small, you are likely paying more closing costs directly.
Estoppel certificate fee
Cost: Up to $350.
What it is: This is for any Canadians purchasing a condominium or strata unit (exempting the province of Quebec). The certificate is required by the lawyer for the closing transaction of the purchase.
As you can see, there are plenty of factors built into closing costs. While not all of these fees may apply to your specific situation, it’s good to keep these costs in mind and factor them into your budget when looking to buy a home.
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