10 Closing Costs When Buying a Home
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Thank you to our friends/partners at Genworth Canada for sharing this great content. We’ve edited it for context.
1. Land transfer tax.
When a home changes hands, many provinces (like BC) and a few municipalities charge a property transfer tax or title transfer fee. Rates are usually on a scale of 0.5% to 2% of the home’s value and can add thousands to your purchase price. First-time homebuyers qualify for rebates or exemptions in some provinces, and some provinces (like Alberta) have transfer fees and taxes that are tiny in comparison (usually in the hundreds of dollars).
2. Appraisal fee.
Lenders may ask you to have a home appraised to confirm its market value. Costs begin at $200 and can be up to $400, depending on the location of the property. Chances are if your mortgage is default insured (less than 20% down requires this) you won’t need an appraisal. It depends on a variety of factors.
3. Legal fees.
A lawyer or notary will help protect your interests by reviewing your purchase agreement, searching the property title, and ensuring that all documents are completed properly. Basic legal fees start between $500 and $800, plus disbursements, with added services as needed.
4. Home inspection.
An inspection can help make you aware of issues related to a home’s structure and systems, such as plumbing and electrical, and recommended or necessary repairs. Fees range from about $350 to $450, and can increase from there for larger homes, and for more remote locations.
5. Home/fire insurance.
Your lender will require proof (at closing) that the property is insured in case of fire and other damage. Insurance costs vary, depending on the coverage needed, but budget for at least $1500 a year (and up for single family homes, larger properties, or a history of claims).
6. Costs for newly constructed homes.
If you’re buying a brand-new home, be prepared to pay for any items not quoted in the original price, including upgrades or paving and landscaping fees. New homes are also subject to GST or HST, although this is often included in your purchase price. A federal rebate reduces the GST or the federal part of the HST to about 3.5% for homes valued at $350,000 or less.
7. Prepaid costs.
If the seller has paid property taxes, water bills, or utilities in advance, you’ll need to reimburse these at closing. This can add hundreds to your upfront costs, but means these bills will be paid for your first months in your new home.
8. Tax on mortgage insurance.
If you have less than a 20% down payment, your lender will require that you obtain mortgage default insurance. You can roll the cost into your mortgage payments, but the PST (if applicable in your province) is due at closing. For example, if mortgage insurance is $5,000 and the PST is 8%, you’ll pay $400.
9. Title insurance.
Title insurance can safeguard you against fraud and problems with your property title or survey. Fees range from $150 to $350 for the policy which protects the lender. For a small additional fee, the policy would protect you as well, and we highly recommend this one-time expense.
10. Moving-in costs.
Before the big day, budget for all those last minute things: $100 or more to rent a van or a few hundred for professional movers, $50 to $60 for a locksmith to rekey your locks, and cleaning supplies. Such incidentals can easily come to $500 or more.