TL;DR: Budget about 1.5% of the home price, over and above your down payment. That number will be different (possibly very different) for everyone, but that's a reasonable guideline.

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Closing costs are those extra legal and administrative fees that need to be paid when purchasing a home. They usually range from 1% to 3% of the price of the home. There are other expenses that come with real estate purchases, and we'll outline those as well. Here are the most common closing costs home buyers will encounter:

Cash expenses! How much and when?

There are two main costs that require home buyers to pay cash before closing. These costs need to be when you write your offer to purchase. 

Home inspection
How much: about $500
When: Offer stage

Find out what problems may be lurking in your new property is essential before you buy. That is why a home inspection report is key. However, it is likely to cost you at least $500 cash. Think of it as $500 well wasted (assuming no major issues found in the report). On the other hand if the report thousands of dollars of needed repairs, the $500 home inspection fee will obviously be worth it. 

Deposit with offer
How much: usually $5,000 to $20,000 and up
When: Offer stage

Sellers will want to know you are serious about buying their house, which is why a deposit is given with an Offer to Purchase. This is different from the down payment and there is no set amount home buyers need to offer as a deposit. This amount will go up or down depending on the value of the property, and the negotiation between the buyer and seller. For lower priced properties, the deposit may be $5,000. For higher priced properties, $20,000 or more is not unusual.

Closing costs included in mortgage

While not always treated as a closing cost, CMHC mortgage insurance is an extra sum that home buyers may need to pay. It is added on top of the mortgage you have applied to take out. There is no cash needed up front. However, if you are putting down less than 20% for a down payment, having CMHC Mortgage Insurance will be required. 

Closing costs you will for sure pay

There are a few closing costs that home buyers will need to be prepared for, almost no matter what.

Property transfer tax
How much: AB +/- $500; BC +/- $7,000 (based on $500k value)
When: 1-2 weeks before closing

This fee or tax will be a percentage of the purchase price for the property. What the total amount is will be different in each province. Some cities also have a municipal land transfer tax that home buyers will need to pay. 

Alberta land title registration fees - usually less than $500

$50 fee plus $2 for every $5000 of mortgage amount, to register a mortgage.
$50 + (($300,000 ÷ $5,000 = 60)  x $2) = $170

$50 fee plus $2 for every $5000 of property amount, to register a property
$50 + (($297,000 ÷ $5,000 = 59.4, rounded to 60)  x $2) = $170
$340 total

If you are buying a property and there is no mortgage, you would not pay the mortgage registration fee. Likewise, if you are refinancing your mortgage and there is no change to the ownership of the property, you would not pay the property registration portion.

British Columbia property transfer tax - $ Thousands

  • 1% on the first $200,000,
  • 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
  • 3% on the portion of the fair market value greater than $2,000,000, and
  • If the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000 (effective February 21, 2018).

A $400,000 property purchase would pay $2,000 (1%) on the first $200,000, and $4,000 (2%) on the next $200,000 for a total of $6,000.

You may qualify to reduce the amount of tax you need to pay if:

Legal fees
How much: $1,000 to $1,500
When: 1-2 weeks before closing

In order to have all the documentation done correctly, home buyers will need to hire a real estate lawyer. These costs will be different depending on the complexities of the purchase, but buyers should be prepared to pay at least $750.

Title insurance
How much: $200 to $400
When: 1-2 weeks before closing

Title insurance protects the insured party (and them only!) against defects in title such as ownership disputes, missing registrations against title, zoning violations, title fraud, and other rare occurrences that can affect the value and marketability of a property.

If the insured’s interest in the property is ever challenged due to a covered risk, the insurer will defend them and pay any associated costs, legal fees or expenses.

Lenders require borrowers to pay for a title insurance policy that covers the lender's interest in the property. After all, if one of the above events actually happened, the value of the property could decrease below the amount of the mortgage. The cost of this insurance ranges depending on what your lawyer charges and which insurer they typically will use, but is usually between $200-$300. There is an additional fee you can pay to cover your interest in the property, and it is highly recommended that you purchase this insurance. It is a one time expense and covers you for as long as you own the property. The homeowner add-on is usually $100 or less.

PST for default insurance
How much: $0 to $2,653 (based on 7% PST)
When: 1-2 weeks before closing

Although the insurance premiums are added to your mortgage total, the PST is required to be paid for the CHMC insurance when the house closes. If you bought a $350,000 property with 5% down your CMHC insurance would be $13,300. If the PST rate is 7%, this would equate to $931 in PST. Your lawyer will collect this when you sign documents for closing.

Closing costs you might pay

Appraisal
How much: $300 to $600
When: Offer stage

For every mortgage transaction there is always a determination of value that takes place. Most often, and depending on the type of transaction and the properyt, CMHC uses their emili database, which contains a vast amount of property sale data from across Canada. Sometimes the lender or CMHC will require a full appraisal report. If this is the case, an appraiser will need to visit the property in person, inspect the property's condition and features, photograph it, and produce a report confirming the market value.

If the lender requires a full appraisal, it is an expense you have to pay (usually by credit card) to the appraisal company before they will schedule the site visit. In this case, you will get a copy of the report and know the value that was determined. 

If CMHC wants it, usually they will pay for it, but nobody will ever see the report or know the value except for them. They will then advise the lender of the result: approved or not approved. 

The cost of an appraisal ranges from $300 to $600 depending on the size and location of the property. A very large property with a very large house could easily cost over $1,000.

Many lenders will cover the appraisal fee up to certain amounts, and many do not. For those that do, the cost (up to the applicable limit) is reimbursed to you after the new mortgage has funded.

Septic tank inspection
How much: $500 and up
When: Offer stage

If the property has a septic tank it is important to be sure that it is still in good condition and functioning properly.

Water tests
How much: $500 and up
When: Offer stage

For properties with a well, buyers should have a water test conducted to ensure it is potable.

Estoppel certificate
How much: +/- $400
When: 1-2 weeks before closing

If you are buying a condo or strata unit you may need to purchase an estoppel certificate, which could be up to $400.

Prepaid property taxes and/or utility bills
How much: $0 to $2,000+
When: 1-2 weeks before closing

Costs like property taxes and utilities may need to be paid to the previous owner, depending on the contract.  Sometimes the owner has paid further ahead for these items than the closing day of the purchase/sale, so you will need to pay them back. These amounts are different for every transaction and could range from $0 to thousands of dollars if the property tax bill was paid for a full year. If the previous owned paid, as an example, a $4,000 tax bill in one lump sum in June, and you buy the property on August 1, you would owe the sellers for 4 months worth, or 1/3, of $4,000 for a total of $1,333.

Ongoing expenses after you take possession

Buying a home is a major purchase and there are some other costs that will come up including:

Property insurance
How much: Based on property value and coverage. Currently trending higher.
When: Usually paid monthly once coverage is in place. Can be paid annually, often for a small discount.

You must have house insurance in place before the mortgage will be funded - the lender won't give the lawyer the money you need to finish buying the house if you don't have fire insurance in place ahead of time. You will have to prove you have this insurance in place when you go to the lawyer's office to sign documents and finish the transaction.

Property taxes
How much: +/- 0.75% of assessed property value. Varies significantly by municipality and province.
When: Usually paid monthly, either directly to the municipality or to your mortgage lender. Can be paid annually, usually in June.

This is the amount that a municipality and province charges a homeowner for services provided by government. It is based on a percentage of your home value. So, if the property tax rate in your area is 1 percent and your home value is $400,000, your property taxes will be $4,000 per year.

Most municipalities will offer a monthly payment plan, and we recommend signing up directly with your municipality to enroll. Your lawyer can assist you with this.

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