What are closing costs?
You know you’ve earned this home: you even gave up your Starbucks habit while saving for it. The sellers have accepted your offer and changed your nervousness into excitement – again. You’re even laughing over what trendy welcome mat will greet your guests!
The real estate agent knew this home was within the price limit the couple had mentioned earlier but could tell they had dropped a bomb when they mentioned that closing costs, on this average house, could easily be more than ten thousand dollars.
Although they were in love and could afford the down payment the real estate agent knew after going over the additional closing costs, they couldn’t afford it and their hearts had just been broken -- again.
The 5 most overlooked closing costs in Canada:
Appraisal Costs
- Whether you’re buying a home or refinancing your existing mortgage, you’ll need to hire an appraiser to review the property. This professional will confirm it’s fair market value
- Budget between $350 - $600+
Mortgage Default Insurance/CHMC Insurance:
- Mandatory in Canada for down payments between 5 – 19.99%, this annual insurance protects the lender if the borrowers default on their loan
- Budget between 1.80 – 4% of your mortgage amount
Legal/Notarial Costs:
- Whether buying an apartment or your “forever home” you’ll need a lawyer or a notary to review your documents, perform proper due diligence and sign off on your documents
- Budget between $400 - $2,500+
Property Transfer Tax
- Calculated on the property’s land value and any improvements
- Budget between 1 – 3% of the property’s fair market value
New Build GST/HST
- Generally, if you’re buying a new home, you pay GST or HST
- Budget anywhere between 5 – 15% of the purchase price, depending on the province
We are here to help
No matter where you are at in your home buying career it can be easy to let the hidden costs of buying a home in Canada get away from you. By remembering these 5 key takeaways, you’ll be able to ensure that, once your offer gets accepted, you’ll know with confidence that you’ll be able to afford hidden closing costs. Working with a trusted real estate agent and a professional mortgage broker provides you with the whole financial picture – not just the list price.
