You've scraped together your down payment and gotten approved for a mortgage—only to discover you need another $15,000 for "closing costs." What are these fees, and how do you budget for them? Here's everything that goes into closing on a Canadian home beyond the purchase price.
What Are Closing Costs?
Closing costs are the fees and expenses you pay when finalizing your home purchase, beyond the down payment and mortgage. They typically range from 1.5% to 4% of the purchase price.
For a $500,000 home: Budget $7,500 to $20,000 in closing costs.
The Major Closing Costs
Land Transfer Tax (Provincial)
Most provinces charge a tax on property purchases:
Ontario:
| Value Portion | Tax Rate |
|---|---|
| Up to $55,000 | 0.5% |
| $55,001 - $250,000 | 1.0% |
| $250,001 - $400,000 | 1.5% |
| $400,001 - $2,000,000 | 2.0% |
| Over $2,000,000 | 2.5% |
Ontario First-Time Buyer Rebate: Up to $4,000
BC:
| Value Portion | Tax Rate |
|---|---|
| Up to $200,000 | 1.0% |
| $200,001 - $2,000,000 | 2.0% |
| Over $2,000,000 | 3.0% |
BC First-Time Buyer Exemption: Full exemption up to $500,000
Other provinces vary. Use our Land Transfer Tax Calculator for your specific situation.
Toronto Municipal Land Transfer Tax
If you're buying in Toronto, you pay an additional municipal tax that mirrors the provincial rates—effectively doubling your land transfer tax.
Toronto First-Time Buyer Rebate: Up to $4,475
Legal Fees and Disbursements
Your real estate lawyer handles:
- Title search and registration
- Document preparation
- Mortgage registration
- Trust account management
Typical cost: $1,500 - $2,500 (including disbursements)
Title Insurance
Protects against:
- Title defects
- Survey issues
- Encroachments
- Fraud
Typical cost: $300 - $500
Home Inspection
Conducted before closing (or before your offer is firm):
Typical cost: $400 - $600
Appraisal Fee
Sometimes required by your lender:
Typical cost: $300 - $500 (may be covered by lender)
Additional Closing Costs
Property Tax Adjustment
If the seller has prepaid property taxes beyond closing, you reimburse them:
Example: Seller prepaid full year, you close July 1st = you pay 6 months of taxes
Condo Costs (If Applicable)
- Status certificate: $100 - $200
- Reserve fund contribution: Varies
- First month's condo fees: Due at closing
Utility Hook-Ups
- Hydro/electricity deposit
- Water/sewer connection fees
- Gas connection fees
Typical cost: $50 - $200 each
Moving Expenses
Often overlooked but necessary:
DIY move: $200 - $500 (truck rental)
Professional movers: $800 - $3,000+
Home Insurance
Required before closing:
Typical annual cost: $1,000 - $2,500+
Closing Costs Summary by Province
| <p> | Cost | Ontario | BC | Alberta |
|---|---|---|---|---|
| Land transfer tax | High | High | Low | |
| Legal fees | $1,500-$2,500 | $1,500-$2,500 | $1,200-$2,000 | |
| Title insurance | $300-$500 | $300-$500 | $200-$400 | |
| <strong>Total estimate</strong> | <strong>2-4% of price</strong> | <strong>2-4% of price</strong> | <strong>1-2% of price</strong> | </p> |
First-Time Buyer Programs to Reduce Costs
First Home Savings Account (FHSA)
- Tax-deductible contributions
- Tax-free growth and withdrawals
- Up to $40,000 lifetime contribution
- Can be used for down payment AND closing costs
RRSP Home Buyers' Plan
- Withdraw up to $35,000 from RRSP
- Repay over 15 years
- Available for first-time buyers (or after 4 years without owning)
Land Transfer Tax Rebates
Ontario and Toronto offer rebates for first-time buyers—potentially saving $8,475 combined.
Tips to Minimize Closing Costs
1. Compare Legal Fee Quotes
Get quotes from 2-3 real estate lawyers. Fees vary significantly.
2. Ask About Lender Credits
Some lenders offer cashback or cover certain costs (appraisal, legal fees).
3. Negotiate with the Seller
In buyer's markets, sellers may contribute to closing costs.
4. Time Your Closing
Close at month-end to minimize property tax adjustments.
5. Bundle Insurance
Get quotes for home and auto together for discounts.
When Are Closing Costs Due?
Your lawyer will provide a "statement of adjustments" a few days before closing, showing exactly what you owe. Funds must be delivered (usually by certified cheque or wire transfer) on or before closing day.
FAQ
Q: Can I roll closing costs into my mortgage?
A: Generally no. You need to pay closing costs from savings or other sources. Some programs allow adding CMHC premiums to the mortgage.
Q: What if I don't have enough for closing costs?
A: You may need to delay your purchase. Some buyers use lines of credit or family gifts.
Q: Are closing costs tax-deductible?
A: Not for your principal residence. Some costs may be deductible for investment properties.
Q: What's the difference between closing costs and down payment?
A: Down payment goes toward the home purchase. Closing costs are the additional fees for completing the transaction.
Q: Do I pay GST/HST on a home purchase?
A: GST/HST applies to NEW homes, not resales. Partial rebates may apply.
What's Next
Closing costs can catch buyers off guard. Get pre-approved and work with our team to budget accurately for your complete home purchase costs.
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