Closing Costs: Everything Besides the Home Price

Saving up for a down payment can be such a long process that it's easy to forget that there are many other expenses involved in buying a home. Learn about the different fees and costs and be sure not to spend every penny on your down payment or start costly renovations until they're all accounted for.

The general rule is to put aside 3-5% of the home's price for closing costs beyond your deposit/down payment. Many of these fees will be handled through your real estate lawyer, and your real estate agent can also explain each fee and what and how you'll need to pay it. As a buyer, your real estate agent's fees are paid by the seller, but if you're both buying and selling at once you'll need to pay commission as a seller.

A deposit is around 1-5% of the purchase price, and is basically an advance on your down payment submitted with your offer to encourage the sellers to take it seriously. You'll need this very quickly, so be sure that it's liquid funds that are easy to access. It needs to be a certified cheque or bank draft, and you'll need another bank draft or wire transfer at closing for this.

Your down payment generally needs to be at least 5% of the purchase price, but having 20% is a good idea if you can manage it, to avoid needing to pay for CMHC Mortgage Insurance on top of the home price. These insurance premiums need to be paid in full at the start of your mortgage, if you need this insurance.

A home inspection is always a good idea, and will run you around $300-1000. You may be required to do a land survey as well by your lender if you're buying a single family home, which will cost up to $1000, although an existing survey may also be accepted.

Your lender will likely require an appraisal to make sure your home is worth what you paid, and make the final decision on the mortgage amount you're approved for. Your part of the appraisal price could be a couple hundred dollars. Keep in mind that if your home is appraised for less than you paid, as can happen in hot markets with bidding wars, you may be approved for less mortgage and may need to pay more in cash.

You'll need to pay a real estate lawyer to draw up your mortgage and for conveyance of title, typically $800-1000. Your lawyer will handle the transfer of payment for many of the other fees in this list.

This is one of the largest fees in closing costs at around 1-1.5% of the purchase price, and needs to be paid as a lump sum when you buy your home (i.e., it can't be rolled into your mortgage). If you're a first time home buyer, you are probably eligible for at least a partial rebate. In addition, Toronto has its own Municipal Land Transfer Tax with its own rebate rules.

Depending on when you close and if the seller has prepaid some of their property taxes, utilities, etc, you may need to pay a portion of these costs through your lawyer. It can be expensive upfront if the seller prepaid for the whole year.

The interest adjustment is a cost you may need to pay depending on the time between your closing date and the date of your first mortgage payment. You can avoid this by scheduling your first mortgage payment exactly one payment period after your closing date.

Your lender will likely require title insurance in case of a property ownership dispute. Your lawyer will handle this with you and it costs a couple hundred dollars on average.

If your home is a new build, you'll need to pay HST/GST on it, but you may be eligible for a rebate if you do need to pay it.

If you're not a citizen or permanent resident of Ontario, you may have to pay a 15% Non-Resident Speculation Tax.

If you're buying a rural property, there may be additional inspections like well and septic that your lender will require.

If you're buying a condo, you'll need an Estoppel certificate, which outlines all the fees, services, penalties, and rules associated with your condo board.

Don't ignore the costs of moving itself, and any new appliances or furniture you'll need when you move into your new home. This always costs more than people expect!

Also, don't forget about property taxes, home insurance, likely increased utilities costs, Condo/Homeowners Association fees if applicable, and ongoing repair and upkeep costs (generally recommended to save 1% of the home price per year for those). It's better to oversave for closing costs and new-house costs, and end up with a little extra to spend on furnishings, versus the alternative.