All you need to know about Closing Costs

What are closing costs?

Closing costs are the additional expenses incurred when purchasing a home, on top of the purchase price. These include legal fees, land transfer taxes, disbursements, and moving expenses. The exact total is usually confirmed close to your closing date, as final details often depend on information from the seller and their lawyer.

As a general rule, closing costs typically range between 1.5% and 2% of the purchase price, though they can vary based on individual circumstances. For insured mortgages with CMHC, Canada Guaranty, or Sagen, you must show proof of available funds for closing costs equal to 1.5% of the purchase price to cover these additional expenses.

Below is a breakdown of what’s included in closing costs.

Property Transfer Tax

When buying property, you’ll pay a land transfer tax to your provincial government—and sometimes to the municipality. The amount depends on the property’s value and the province.

Some provinces have a marginal tax rate, where the rate increases with the purchase price, while others use a flat rate. Many provinces provide online calculators to estimate this tax.

First-Time Homebuyer Rebates

First-time homebuyers in Ontario, Prince Edward Island, and British Columbia may qualify for land transfer tax rebates. For example:

- A first-time buyer of a $500,000 home in Toronto could save $8,475.

- In BC, buyers may save up to $8,000 on homes priced under $835,000. For homes up to $860,000, partial rebates apply.

To qualify for rebates, you must meet criteria such as:

- Never owning a principal residence anywhere in the world.

- Being a Canadian citizen or permanent resident, and residing in the province for at least 12 months.

Always confirm eligibility with your lawyer.

Legal Fees

Legal representation costs approximately $1,100–$1,500 for a purchase with a mortgage. If selling a property simultaneously, add about $900. Fees vary by lawyer, but this is a general range.

Interest Adjustment

The interest adjustment date marks the start of your mortgage’s interest calculation, typically on the 1st day of the month after your closing date. For example:

- Completion date: June 20

- Interest adjustment date: July 1

- First full payment: August 1

Title Insurance or Survey Certificate

Lenders typically require either **title insurance** or a **survey certificate**, with most opting for the former. Your lawyer or notary will explain the differences and costs.

Title Insurance Cost: $150–$300

Property Appraisal

A professional appraisal evaluates the home’s market value, ensuring the lender isn’t over-lending, and protecting you from overpaying. Appraisals are common for conventional mortgages (20%+ down payment), private sales, and investment properties.

Approximate Cost: $375–$800, depending on property size, location, and urgency.

Property Inspection

A thorough inspection assesses the home’s structure, systems, and components, including foundations, plumbing, roofing, and more. This is for the buyer’s benefit and isn’t mandatory for the bank.

**Approximate Cost**: $550–$800

Property Tax Adjustment

Property taxes are generally paid annually in July. Depending on your purchase date:

Before July 1: The seller reimburses you for the taxes paid from January 1 to the closing date.

After July 1: You reimburse the seller for taxes covering your ownership period from the completion date to December 31.

One day’s taxes can be estimated as:

(Annual taxes - $570 homeowner grant) ÷ 365

Insurance Binder

Banks require proof of adequate insurance to protect against losses. This is provided by your insurance agent and sent to your lawyer.

Fire Insurance

For houses (but not typically condos or townhouses), lenders require a fire insurance policy to ensure the home can be rebuilt if damaged, protecting their collateral. can make all the difference.