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As a first-time home buyer, you probably know how important it is to have your down payment ready when you want to purchase a home. However, while the down payment represents one of your major expenses, it is not the only one. There are several other expenses involved in buying a home. These costs, often referred to as “closing costs” can add up to anywhere from 1.5 to 4% of the selling price of the house.

Some of the closing costs to prepare for when buying a house include:

Deposit and Down Payment

The down payment is that part of the purchase price that the buyer pays down in cash. Depending on the price of the house, the minimum down payment is anywhere from 5% or more. If your down payment is less than 20%, you will need to get mortgage default insurance.

An initial deposit is usually required in cheque, and serves as a show of good faith to the seller that the buyer is serious about purchasing the property. The deposit is held in trust and usually becomes part of the eventual down payment if the transaction goes through. The amount of deposit varies.

Home Inspection Fee

While not mandatory, having a professional home inspection done is smart, especially if you are a first-time buyer. The home inspector will inspect the condition of the house with respect to structure, plumbing, ventilation, heating, etc. A full home inspection will cost you approximately $500 on average plus GST/HST.

Property Appraisal/Valuation Fee

Your mortgage lender may require you to obtain a professional appraisal of the property to determine its worth. A property appraisal may cost anywhere from $250 to $500. Some lenders choose to pay the appraisal fee.

Property Survey Fee

A survey shows the boundaries of the land and indicates location of major structures and any encroachments on the property. A mortgage lender may require that you provide a survey or you may just want one for keeps to ease your mind, especially if newer structures or additions have been added to the house. A survey costs between $1000 and $2000.

Title Insurance

This is usually optional but is advisable. Title insurance covers potential issues that may arise after the purchase from title defects, survey errors, existing liens on the property, encroachment issues, zoning issues, etc. Title insurance will set you back $300 or more.

Land Transfer Tax (LTT)

Land transfer tax is charged whenever you buy a home. The cost varies based on the province and is usually a percentage of the purchase price. Some provinces (including Alberta and Saskatchewan) do not charge a traditional LTT, while some cities (e.g. Toronto) charge an additional municipal land transfer tax.

Land transfer taxes are easily the second largest expense after the down payment when considering closing costs. In Winnipeg, for example, buying a $425,000 house would attract $6,150 tax bill. You can utilize ratehub’s land transfer calculator to get an estimate.

Related: FREE e-Book: How To Buy A Home in Canada

Legal Fees

A lawyer is required to help you sort through the legal paperwork to ensure it is accurate and makes sense. Your lawyer will also likely carry out a title search and sort out the title insurance on your behalf. These costs may be billed separately or combined with the legal fees. Clarify this with your lawyer before you start. Legal fees vary, with basic fees starting at around $500. After incorporating other expenses including mailing, photocopying, etc., expect your final bill to be approximately $1000 or more.

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Adjustment Costs

A statement of adjustments is drawn up by your lawyer to ensure that prepaid costs like utility bills, property taxes, condo maintenance fees, and other bills are adjusted fairly. The seller gets a credit back if they have already paid some bills past the date when you take ownership of the property.

Home Insurance Premium

Some mortgage lenders will ask for proof of a home insurance before they release funds on closing day. Home or property insurance covers the cost of replacing your home and its contents. It may be billed monthly or annually. The cost will vary depending on the value of your home, its contents, location, type of coverage required, your deductible, presence/absence of an alarm system (fire and burglary), etc. The average annual home insurance paid by Canadians was $840 in 2012.

PST/HST on Mortgage Default Insurance

If you put down less than 20% of the purchase price as down payment, your mortgage is considered a high-ratio mortgage and requires that you buy a mortgage loan insurance. The premium can be financed through the mortgage, however, where applicable, the PST/HST on this insurance must be paid upfront. You can calculate the amount of of your CMHC mortgage loan insurance here.

Tax on New Homes

If you are buying a brand new house, you may be subject to both federal and provincial taxes. The tax is often incorporated into the sale price, but it is better to confirm before proceeding. You may qualify for a partial rebate on taxes paid when filing your income tax return, but you will need to pay it upfront when buying the house.

Property Taxes

You are required to pay property taxes on a house you own. The tax is levied on an annual basis by the municipality where your house is located and must be paid either monthly or annually. the amount of property tax differs based on the assessed value of your home.

Estoppel Certificate Fee

This fee is applicable if you are buying a condominium. Also known as status certificate, the estoppel certificate is a document detailing important information relating to the specific condo unit and the condominium corporation. The information includes bylaws, rules and regulations, insurance information, property management and ownership, financial statements, etc. This fee may cost up to $100 or more.

Other Costs

There are many other direct and indirect costs of buying a house. They include moving costs, new appliances, decorations and new furnishings, renovations, repairs, utility hook up fees, hand tools, vent cleaning, house cleaning, and many more. These costs may range from anywhere from  few hundred dollars to several thousand dollars. you should plan for them in your budget.


Buying a home in Canada is a huge project that calls for detailed planning and financial management. At 1.5 to 4% of the purchase price of the house, closing costs are a significant expense and it is important that home buyers are aware and prepared for these costs in advance. [bctt tweet=”Plan ahead! Be reasonably flexible but try to stay within budget! Happy home hunting!” username=”SavvyCanadians” prompt=”Tell A Friend” nofollow=”yes”]