When buying a home in Canada, you need about 3-5% of the home’s value to cover closing costs.
There are also closing costs associated with selling a home.
Learn more about the closing costs for sellers in Ontario, British Columbia, and elsewhere in Canada below.
1. Realtor’s Commissions
The seller is usually responsible for paying the commissions to realtors or real estate agents used by them and the buyer. These commissions can set you back between 3-7% of the selling price of the house.
Average Canadian commissions are around 5% (2.5% goes to the seller’s realtor, and the remainder 2.5% goes to the buyer’s realtor). On a home sold for $450,000, for example, total commissions are $22,500 (using a 5% rate).
You can save on commissions by selling the house yourself and avoiding the services of an agent. However, this comes with its own challenges.
2. Legal Fees
Your real estate lawyer will work with the buyer’s lawyer and other relevant parties (bank, etc.).
They review all legal documentation, prepare a statement of adjustments for taxes or utilities owed or prepaid, review and discharge the title for the property and mortgage, deliver the closing packages and keys to the buyer’s lawyer, and much more.
Legal fees can range anywhere from $500 to $1,500.
3. Closing Adjustments
Your lawyer will prepare a statement of adjustments.
Depending on how you pay your property taxes and utility bills (i.e. prepaid or accrued), you may have to pay what is owed up until the closing day or be due for a refund if you have paid these expenses in advance.
This is generally included in your closing costs when selling a home.
4. Bank Fees
If you have a mortgage and plan to pay it off with the proceeds of your sale before the term ends, you may be subject to prepayment penalties.
Additionally, banks will charge a mortgage discharge fee for discharging the mortgage – anywhere from $250 to $500. If you are porting your mortgage to a new property, you can avoid some of these fees.
Related: Important Questions To Ask Before Buying A Home
5. Costs of Repairs or Replacements
A potential buyer may request that you pay for some repairs (or replacements) in their offer to purchase, counter-offer, or, following the conduction of a home inspection.
Some popular repair requests include:
- Roof repairs
- Heating and cooling systems repair (furnace, air conditioners, fans, etc.)
- Basement leaks
- Unstable decks
- Mould removal
- Upgrading electrical panels, etc.
Of course, you, as the seller, always have the option to decline to pay for repairs or replacements.
6. Home Staging Cost
If you plan to stage your home to make it more appealing to prospective buyers, you will incur additional costs.
7. Moving Costs
Moving your possessions from one house to another will cost you.
Costs would vary depending on how many possessions you have to move, if you’re doing the move yourself or using a moving company, how far your new location is, and so on.
Costs can range from a few bucks to thousands of dollars.
8. Capital Gains Tax
When you sell your principal residence, you’re not required to pay taxes on profits (i.e. capital gains) realized.
However, when this is not the case, capital gains tax is required, and 50% of the profit is taxable.
Closing Costs When Buying a Home in Canada
The infographic below shows the various closing costs incurred when buying a home in Canada.
Final Thoughts
It’s a good idea to be prepared for closing costs irrespective of the position you’re taking in a real estate transaction (Buyer or Seller).
This will help you avoid unpleasant surprises!
Also Read:
- Tangerine Mortgage Rates Review
- Best Mortgage Rates in Canada
- Neo Mortgage Review
- First-Time Home Buyer: Mortgage Terms You Should Know
- HomeWise Mortgage Review
Are there selling costs missing from the list? Let us know in the comments.
