All You Need to Know About 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.
What Are Closing Costs?
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.
First-Time Homebuyer Rebates
- 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.
Legal Fees
Legal representation costs approximately $1,100–$1,500 for a purchase with a mortgage. If selling a property simultaneously, add about $900.
Other Costs
- Interest Adjustment: The interest adjustment date marks the start of your mortgage’s interest calculation.
- Title Insurance or Survey Certificate: Required by lenders to secure your investment.
- Property Appraisal: Ensures the lender isn’t over-lending and protects you from overpaying.
- Property Inspection: Evaluates the home’s condition before purchase.
- Property Tax Adjustment: Adjusts for property taxes paid or owed.
- Insurance Binder: Proof of adequate home insurance.
- Fire Insurance: Required for houses to protect against loss.