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Be Aware Of Home Closing Costs

Buying a home is an expensive, time-consuming process, and before you’re able to close you have to pay several closing costs.

Closing costs are often overlooked when purchasing a home because they’re not technically included in the purchase price or the mortgage amount. The purchase price is what the seller gets (minus their realtor fees and outstanding mortgage balance) and the mortgage amount is how much you have to borrow to buy it.

Closing costs don’t go to the seller. In most cases, closing costs go to the people that helped you purchase the home, like your lawyer and insurance company. These costs don’t go towards building equity like a down payment does, but without the help of others, you wouldn’t have been able to make the purchase.

You may want to use all the money you have saved towards your down payment so that you can avoid CMHC insurance fees, but you should keep some money set aside to cover these costs as well.


Fees you’ve already paid

By now you will have already paid the home inspector, the deposit to the sellers (which is part of your down payment), and mortgage default insurance if required. Mortgage default insurance is added on top of your mortgage, so you don’t have to pay it all up front.


Fees you need to pay

Land transfer tax

This provincial tax is applicable on every property sale and is calculated as a percentage of the purchase price. Some cities also have a municipal land transfer tax, which is in addition to the provincial tax. First-time homebuyers are entitled to a land transfer tax rebate.

You can calculate the land transfer tax you’ll owe with our land transfer tax calculator.

You can also view a list of the first-time homebuyer’s programs in Canada, including a list of applicable land transfer tax rebates.


Legal fees

Paying the real estate lawyer will run around $500 - $1,000. If you get a mortgage with RateShop.ca, you get $300 off your real estate legal fees.


Title insurance

Title insurance protects you in the case of a property dispute and usually costs between $100 and $300.

You can learn more about title insurance here.

PST on CMHC insurance

Although you don’t have to pay the entire CMHC premium up front, you are required to pay the PST on the whole amount.


Fees you may have to pay

Septic tank

If the house is on a septic system, the septic tank should be tested to make sure it’s working properly. This is definitely not something you’ll want to break after moving in.


Water tests

If the house uses well water, you’ll want to make sure the well is working properly and the water is safe to drink. You should also learn about the safe limit of usage.


Appraisal fee

An appraisal is an estimate of the value of your home done by a professional. The lender wants to know the value of the house so that they can be sure of its resale value in case you default on the mortgage.


Property tax reimbursement

If the last homeowner paid for the property taxes in advance, you might have to reimburse them the cost.


Fees you should consider paying

Homeowner’s insurance

Unlike car insurance, homeowner’s insurance isn’t legally required. However, the cost of something going drastically wrong, such as a fire, can be financially crippling. Getting home insurance will protect you not only against total home destruction but even minor things like your personal property being stolen or damaged.

Many lenders will require you to take out home insurance in order to get approved for a mortgage. This is to protect both you and them – in the event your home is damaged or destroyed, you don’t want to be stuck making payments on a house that’s no longer livable.


You’re finished! At this point, all your costs have been paid and you’re able to move into your new home on the closing date. Congratulations on your home purchase!


Chris Chris 05/06/2019
Canadian personal finance buff and all-around writing enthusiast, Chris loves breaking down complicated money ideas to show that they're really not so complex. 
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