TL;DR - Rough Math on Closing Costs
There are quite a few small items that can come up for closing costs
Typically the closing costs are between 1.5-3% – in generally I suggest budgeting for the higher amount just in case.
Most Common Closing costs in Canada:
Lawyer or Notary Fees
Your lawyer and notary will do a few very important things during the mortgage and home buying process including:
- Moving money around
- Registering your name(s) on the real estate title
- Registering your mortgage(s) on the real estate title
- Advising about key real estate legal items
Typically, your lawyer or notary cost around $1,000 – $1,700 but can go up from there depending on what’s happening. For example, if you need additional consultation or there are legal challenges with the purchase, you may need to pay additional legal and consulting fees.
Land Transfer Tax (LTT) or Property Transfer Tax (PTT)
A tax some provincial governments charge when you buy a house, paid at closing
Each province is different
- BC charges the following “waterfall” tax:
- 1% of the fair market value up to and including $200,000
- 2% of the fair market value greater than $200,000 and up to and including $2mil
- 3% of the fair market value great than $2,000,000
- An additional 2% on residential property over $3,000,000
- AB does not have an LTT or PTT but instead has a land title transfer fee
- On the property, the fee charged is:
- $50 base plus
- $2 for every $5,000 of the property value
- On the mortgage, the fee charged is:
- $50 base plus
- $1.50 for every $5,000 of the mortgage amount
- On the property, the fee charged is:
Some provinces charge PST on this tax. These provinces are:
- Quebec
- Ontario
- Saskatchewan
Home Inspection Fee
You aren’t technically required to have a home inspection but I highly recommend it… to the point that it should be seen as a requirement
Home Inspections typically cost between $300-$500
Appraisal Fee
If you are getting a mortgage, lenders will require the property value to be determined. They do this in a few ways, depending on the mortgage type and the lender. Here are a few ways this is done and what costs you can expect with each direction:
- If you are getting an insured mortgage, typically the lenders will use a “desktop appraisal” which is done internally. The charge is around $100 but it’s almost always waived by the lender for insured mortgages.
- If you are getting a conventional mortgage (20% down payment or more) you generally will need to pay for an appraisal. The appraisal is about $350-$500 depending on several factors like location and property complexity.
Note: some brokers or bankers will pay for this for you.
Title Insurance
Title insurance protects you in the case that there is a dispute about ownership of the property – and yes, this does happen!
Title insurance can be pricey but is required by all lenders.
$300 seems to be a good estimate for title insurance
Property Taxes
In some cases, you may be required to pay a portion of property taxes. This is because the seller may have already paid for the year’s property taxes and may request that you pay them back for the amount overlapping your ownership
Interest Adjustment
If your mortgage payment and closing date aren’t aligned then there may be an interest adjustment charge instead of a standard mortgage payment.
This happens when, as an example, you decide on a monthly mortgage payment but your first payment happens before a whole month. The first payment you would make would be the interest accrued (i.e. calculated) for the time period.
GST and HST on New Construction Housing
When you build a home or are buying a newly built home, there is GST or HST that’s required. Some provinces have GST or HST exemptions. If you qualify for the exemption then you aren’t required to pay the GST
When and how are these closing costs paid?
Most of these costs are paid at your lawyer or notary’s office at the time of closing
The one main exception is the appraisal. This would be needed by the lender earlier in the mortgage approval process.