Once you have figured out the home price range you can afford and the type of mortgage you qualify for, you will need to calculate all of the associated costs of the transaction to make sure you are financially ready.
The sections below highlight some of the most significant home purchase closing costs.
- House Inspection Fees
If you are buying a resale home, before committing, you should have the home inspected by a professional building inspector to assess any structural problems or required repairs. Expect to pay $300 to $400 for the inspection. Keep the written report as it can be useful if you sell the house down the road. If you are buying a new home, you will probably be exempt from this fee: a new home builder is legislated to provide an inspection before the buyer takes possession.
- Legal Fees
You will need a lawyer to act on your behalf in purchasing and mortgaging a property. A lawyer also takes care of details like the transfer of the deed. You’ll likely pay at least $750 to your lawyer, but fees vary, so get an estimate ahead of time and ask what’s included in that price.
- Survey or title Insurance
To close a home purchase, you need an up-to-date survey of the property, which specifies its size and shape, the type and size of the building, including additions, and the location of these buildings. If the vendor doesn’t provide an acceptable survey, you’ll need to pay a land surveyor about $750 for a new one. Alternatively, title insurance can be purchased for less and protects the lender and buyer against loss or damage due to an inaccurate survey. It provides coverage for any existing bylaw violations (like a building being too close to a sidewalk or other public property, or a driveway being too wide), encroachments, legal rights of access and other title related problems that could devalue the property.
- Land Transfer Tax and GST
You will pay a one time provincial tax based on a percentage of the purchase price of the property which is calculated on a sliding scale. You will find a land transfer tax calculator elsewhere on this site under resources. Newly built homes as well as substantially renovated houses are also subject to GST and some new home builders include this tax in the cost.
- Adjustment costs
You will be responsible for your share of any costs for utilities, fuel or property taxes the current owner has prepaid. Sometimes property taxes have been paid by the previous owner for up to half a year in advance, for example.
- Mortgage Insurance
If your mortgage is more than 80% of the property’s selling price, it is considered high ratio and as the home buyer you must buy insurance to protect the lender. It is a good idea to insure your mortgage in any event.
- Moving costs
Don’t forget the movers. Sometimes better deals can be negotiated if you are willing to move mid-month or mid week, but usually count on paying $1000 or more and make sure your new home insurance commences the day you take ownership.
- Set up costs
If you are planning to install telephone, cable, satellite, internet access or an alarm system, you may face connection charges. Some service and utility companies ask for a sizable security deposit up front if you don’t have a previous history of bill payment.
Canada Mortgage and Housing Corporation has an excellent tool to help you estimate the cost of your home purchase. Try the Home Purchase Cost Estimator.