CLOSING COSTS

are the legal and administrative costs you will need to pay when your house closes

Closing costs, ranging from 1.5 to 4%1 of selling price, are the legal and administrative costs you will need to pay when your house closes. In addition to closing costs, there are other expenses and/or events that may require a cash outlay before, on or after your house closes. We will outline these in detail to ensure these often-unexpected costs do not sneak up on you.

Closing Costs

Cash outlays required before your Mortgage Closes

The minimum down payment in Canada depends on the purchase price of the home:

Home Inspection Fee

It is highly recommended that you contract a home inspection as a condition of your Offer to Purchase. A home inspector will assemble a report on the condition of the home for a fee of around $500, depending on the complexities of the inspection.

Deposit

A deposit that counts towards your down payment is required when you make an Offer to Purchase. The deposit may amount to 5% of the purchase price, which is the minimum down payment percentage in Canada.

Appraisal Fee

An appraisal, which is an estimate on the value of your home, is often covered by your mortgage lender. An appraisal is performed to certify the lender of the resale value of the home in the case you default on the mortgage. The cost is usually between $250 and $350.

Costs Financed in your Mortgage

Mortgage Loan Insurance, or CMHC insurance, is not normally considered a traditional closing cost as it is added to the total mortgage you require and amortized over the life of your mortgage. We have chosen to include it here to point out the major difference between it and traditional closing costs: it does not require a cash outlay upon closing.

Mortgage Loan Insurance

If you purchase a house with less than a 20% down payment, you will be required to buy Mortgage Loan Insurance, commonly referred to as CMHC insurance. This protects the lender in the case the borrower, defaults on the loan.

Mandatory Closing Costs covered by the Home Buyer

The following is a list of Closing Costs that are incurred by the Home Buyer

Calculated as a percentage of the purchase price of your home, all provinces have a Land Transfer Tax (LTT) payable on closing, with the amount varying in each province. Some cities, such as Toronto, also have a municipal LTT.

You can expect to incur approx $1000  (plus GST/HST) on legal fees, which account for the preparation and recording of official documents.

Today, most lenders require title insurance to protect against losses in the event of a property ownership dispute. You can obtain Title Insurance, which costs $100-$300 through your Lawyer.

Though Mortgage Loan Insurance itself is financed through the mortgage, PST on the insurance must be paid in cash at the time of close.

Closing Day

Closing Day is the day you finally take legal possession of your home. It’s important the bulk of your administration is completed by this point including transferring your down payment to your Lawyer. Transferring down payment funds, especially from your RRSP can take time, and should be done several days before close.

On closing date, the following events will take place:

  • Your lender will provide the mortgage funds to your Lawyer

  • You must provide, your down payment less the deposit, to your Lawyer along with the Closing Costs.

  • Your Lawyer pays the previous owner, registers the home in your name, and gives you the deed and keys to your new home.

Congratulations! You are now ready to move in.