Closing Costs

The following is an extensive list of common closing costs; not all of these may apply in your situation. As well, please note that you may need to pay additional fees not mentioned here depending on your situation and/or changes to the requirements of the law or tax codes.

Down payment and Mortgage Payments
Your financial institution will be able to provide a fee schedule outlining your down payment and monthly mortgage payments. The down payment represents a significant financial outlay for most people; the first months after purchasing a new home may require some careful budgeting. The payment may also include a portion of the property taxes (see below).

Mortgage Insurance
If you are taking out a high-ratio mortgage in which the total loan amount is in excess of 75% of the property value, you will be required to be insured against mortgage default. This mortgage insurance may be added into your monthly payments.

Interest Adjustment
When you purchase a home requiring financing, the mortgage payments are periodic and in arrears. If the completion date is not on a mortgage payment date, then there is an Interest Adjustment, which is interest charged on the money borrowed for the period between the date the money is advanced and the date of the first mortgage payment. Therefore, if your mortgage payments are $700 every two weeks and you buy with 12 days before your next payment, you will pay 12/14 of a mortgage payment as an interest adjustment (this number is approximate since the payment is interest only and the $700 is a blended payment of principal and interest).

Repairs and Renovations
A thorough home inspection should alert you to any serious problems with your new home before purchasing it. If you bought the home as a fixer-upper hoping to renovate and upgrade, be prepared for a few potential expenditures. After a professional renovator assesses your home and you agree to proceed, you will most likely be required to pay a deposit that may be 20% or more of the projected cost. As well, in the process of conducting a home renovation, the contractors may encounter previously unknown structural problems, materials may be delayed from the supplier and the project may take longer than anticipated. All of these represent potential costs in one form or another.

If you are buying an older home, you may need to make certain adjustments for your comfort such as upgrading the insulation. It is also a good idea to put $100 or more aside every month as a fund to cover the cost of unexpected repairs (e.g., electrical, roofing, etc.).

Federal Tax
Remember that 7% GST is applied to all new homes. Part of that tax amount (up to a maximum of 2.5%) is a rebate if your home costs less than $450,000. There is no rebate on resale housing unless the home has been substantially renovated, in which case, it may be taxed as if it were a new home. Check with Canada Customs and Revenue for details (http://www.ccra-adrc.gc.ca/)

Property Taxes
The rates vary widely across the country but the average Canadian should expect to pay from $1,000 to $3,000 per year in property taxes. If you have a high-ratio mortgage, your lender may require that you pay one-twelfth of your projected annual taxes each month along with your mortgage payments. Lenders hope to minimize the risk that homeowners will not have sufficient funds to pay the taxes. If this happened, the property could conceivably be put up for tax sale after several years in arrears, and compromise the lender's security.

Your lender typically sets up a separate tax account and remits the funds directly to the municipality at the appropriate time each year. Municipalities usually require two payments: a partial payment in the first quarter and the balance later in the year. Because your lender holds your money in trust, inquire as to whether interest is going to be paid on your tax account and the rate of interest.

Tax Adjustment
If a homeowner has paid their annual property taxes in full then sells the home before the end of the year, the buyer is required to reimburse the seller for the prepaid taxes. For example, if the owner pays their taxes in full on July 1, then sells the home on July 31, the buyer must reimburse the seller for 11/12 of the property taxes.

Appraisal fee
If your loan is not insured, your lender may require a property appraisal at your expense. A basic appraisal for mortgage purposes typically costs between $150 and $250. The actual cost will vary with the location and complexity of the inspection.

Survey fee
Your lender will require an up-to-date survey. Ask the vendor to provide one as a condition of your Offer to Purchase, or you will have to pay to have one done.

Title Insurance
Title insurance can be used to protect the purchaser in the event of minor problems with the title to the property or if there is a request by the lender for a survey. Title insurance may help to reduce lawyer or notary fees if applicable. Title insurance is a one-time expense, paid at the closing by the purchaser.

Home inspection fee
A professional home inspection will provide you with an assessment of the state of the property prior to purchasing. The price of the inspection will vary with the size of the home but you can expect to pay approximately $400. Municipalities can also supply any available inspection reports on the property for a fee.

Property insurance
This insurance covers the replacement value of the structure of your home and its contents. Your lender will insist on this because your home is the security for your mortgage.

Land transfer tax
This applies in most provinces. It varies as a percentage of the property's purchase price. It is usually about 1% - 4%.

Legal fees
Lawyers are required to review the Offer to Purchase, search the title, draw up the mortgage papers and ensure the closing details are in order. Legal fees for a mortgage will vary but you should budget for at least $500. In the province of Quebec, a notary is used instead of a lawyer.

Condominium fees
If you have purchased a condominium, you can expect to be charged a monthly fee for common-area maintenance and building repairs. The fee is typically a few hundred dollars.

Estoppel certificate
This is a certificate that outlines a condominium corporation's financial and legal state. The certificate and supporting documents will cost you approximately $50.

Well water quantity and quality certification
If you're buying a home with well service, you'll have to pay a fee from $50-$100 to certify the quantity and quality of the water.

Utilities
An adjustment to utilities would occur if the buyer assumed the seller's prepaid utility accounts (e.g. cable, telephone or electricity). Generally, the seller of the property terminates these accounts, but, if the buyer assumed the accounts, then there would be an adjustment for monies paid in advance.

When setting up new accounts, buyers can expect to be charged hook-up fees for utilities such as telephone, cable, etc.

Moving costs
Expect to pay approximately $75 per hour to hire a truck with two people for shorter moves. For long distance moves, get written estimates from three or four reputable movers. (Be sure your home insurance covers the transport of your belongings.) Also budget for hotel stays and carpeting cleaning if applicable.

Being aware of the potential costs of buying a home will help you avoid unwelcome financial surprises and allow you to fully enjoy your new home!