Closing costs for a mortgage

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Closing costs are just part of the package when you’re buying a home. The exact amount will vary with each purchase but you should look to budget between 2% - 4% of the final sale price. By far the largest cost will be the Property Transfer Tax (PTT) and, if you're buying a newly built home, GST. But don’t forget to look for rebates and if you’re a first time home buyer, there are some great incentives available from both the provincial and federal government.

In most cases your closing costs must be paid up-front and it’s important to budget for accordingly. For instance, GST can be included in your mortgage amount, however, PPT cannot.

Here’s a breakdown of some of the average costs that you can expect when getting a mortgage in Canada.

Adjustment costs

The buyer must reimburse the seller for any property taxes or utilities the seller prepaid after the buyer takes possession. e.g., if the seller pays property taxes for the next 12 months, and the buyer takes possession 3 months later, the buyer will then reimburse the seller for 9 months’ worth of property taxes.

Estimated Cost: Varies, but you should consider having $1,000 in your budget

Required? Only if applicable

Balance of purchase price

This is the purchase price less your initial down payment that will need to be paid. Your lender will pay the seller the balance.

Estimated Cost: Varies

Required? Yes

Default insurance

Your mortgage provider may arrange default insurance for you. You can add this to your mortgage total, or if you have the money, you can pay it in full. This insurance protects lenders in the event a home buyer defaults on a mortgage.

Estimated Cost: Between 0.60% and 4.50% of the mortgage amount

Required? Yes, if you have less than a 20% down payment

Disbursements

Disbursements are paid to your lawyer, or notary, to reimburse for miscellaneous fees like mailing, photocopying, and costs to register the property in your name with land title.

Estimated Cost: Varies, budget between $200 - 300

Required? Yes

Estopple / Info certificate

You will need an Estopple Certificate if you are buying a condo or a strata unit. This is a signed statement from the condo corporation that will detail the fees, the status of the seller's payments, the reserve fund, etc. Your lawyer / notary requires this document to proceed with the closing transaction of the purchase.

The seller may also provide these as part of the selling process.

Estimated Cost: $50

Required? Yes, if you're buying a strata property

Goods and service tax (GST)

GST is applied to newly built homes at 5%. You may be entitled to a GST New Housing Rebate up to a max of $6,300.

Estimated Cost: 5% of the home purchase price

Required? Yes, if the house you're buying is a new build

Home inspection

When possible it’s a good idea to make your offer subject to an inspection. You will discover the true condition of the property, allowing you to budget for any necessary maintenance or repairs.

Estimated Cost: Between $900 - $1,100

Required? No, but strongly recommended

Land survey & building certificate

The land survey & building certificate is a document prepared and signed by a British Columbia Land Surveyor and clearly shows the positions of existing buildings on a parcel of land. To save some money, you could ask if the seller has a recent certificate they can provide you. Your lender will need this from you to fund your mortgage.

Estimated Cost: Varies

Required? Yes

Legal fees

A lawyer or notary will handle all the details of the sale and make sure the land title is transferred to your name. Be prepared and ask for a breakdown of what services you'll be covered for.

Estimated Cost: Varies

Required? Yes

Mortgage prepayment penalty

A mortgage prepayment penalty is a fee for breaking your term. If you're switching your mortgage to a new lender, or selling before the end of your current mortgage term, you may need to pay this penalty.

Estimated Cost: Varies based on your current mortgage

Required? When applicable

Moving costs

You can do this yourself and save a lot of money, but if you have lots of heavy items or are moving across country, you may want to hire a professional moving service. If you do this yourself don't forget to add in the cost of pizza for all your helpers!

Estimated Cost: Varies

Required? No

Property appraisal

You may be required to get your property appraised so your lender is satisfied the mortgage amount is reasonable given the property value.

Estimated Cost: Varies, but starts at $350

Required? Depends on your lender

Property transfer tax (PTT)

Property Transfer Tax (PPT) is the tax you pay to transfer the property. The cost will vary based on the value of the house.

Estimated Cost: Varies

Required? Yes

Switching / setting up utilities

You may have to pay fees for switching and / or setting up your utilities. This may include charges for gas, electricity, water, internet, cable, and security systems.

Estimated Cost: Varies

Required? When applicable

Title insurance

Title insurance protects against loss cause by defects of title to the property, including real estate fraud. This cost may be included in your legal fees.

Estimated Cost: Varies, budget $250 - $500

Required? Depends on your lender

Water quality inspection fee

If your new home’s source of drinking water is from a well, you may need to have its quality tested to make sure it’s safe.

Estimated Cost: Varies

Required? No

Septic tank

If your property is linked to a septic tank, you should have it tested prior to removing conditions to ensure that no expensive repairs or replacements will be required in the near future.

Estimated Cost: Varies

Required? No

Talk to a mortage specialist, they can help you adjust your budget to accommodate closing costs and other ongoing expenses, such as property taxes, home insurance, ongoing maintenance, strata fees, so you are prepared for every home-ownership scenario.

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