Updated October 6, 2024
Originally published Sept 2019
If you’re buying your first home, you’ve heard of closing costs. But, what are those costs and how much will they set you back? In this article, I’ll share the different closing costs and what you can expect to pay.
Closing costs include all legal and administrative expenses you’ll be responsible for paying on or near your home’s closing date. It’s important to include these costs in your budget because, in most cases, they can’t be rolled into your mortgage payments.
Lenders suggest that hopeful homeowners have 1.5% of the purchase price to cover PTT and legal costs. This isn’t exact by any means and having more saved and at the ready will make those final costs easy to pay.
Provincial tax is charged whenever a property is purchased (unless you’re a first-time buyer, in which case you’re likely exempt from the cost up until a certain purchasing threshold). The general property transfer tax rate is:
1% of the fair market value up to and including $200,000.
2% of the fair market value greater than $200,000 and up to and including $2,000,000.
3% of the fair market value greater than $2,000,000.
To understand more about property transfer tax and what you can expect to pay, read my article “Everything You Need to Know about Property Transfer Tax.”
Tax is only charged on new homes. Fortunately, if your new home is priced below $450,000 before GST, you may be eligible for a partial rebate of the 5% GST portion. Certain conditions may apply. Contact your lawyer or notary for full details.
For example, if you purchase a new condo for $600,000, you’ll be responsible for paying $30,000 upfront for the GST.
Your GST payment can always be included in financing, so please be sure to speak to me about that during the mortgage process.
An appraisal is an unbiased estimate of the value of your home. It certifies the property’s resale value to the lender if you default on your mortgage. The average range is typically $300-$500 but varies based on specific properties.
This will only be applicable if you are putting 20% or more down payment and isn’t always necessary. If you’re looking for an appraisal, I will be able to set that up for you and then you’d be responsible for covering the fee.
Closing costs for first-time homebuyers include legal and appraisal fees. It’s important to budget for these fees ahead of time!
Your lawyer/notary will charge you a fee for drawing up the mortgage and conveyance of title. The typical cost I see nowadays is between $2,000-$3,000 but the amount will depend on the individual that you work with. The total includes the lawyer fees (say $1,000 to $1,800) plus title insurance and other smaller things.
You’ll need to pay interest on any gap between the closing date of the purchase and the first payment date of the mortgage. You can avoid dealing with an interest adjustment by scheduling your first mortgage payment to commence exactly one payment period after your closing date.
Your lawyer/notary will calculate and prepare a statement of adjustments for your portion owing on utilities, property taxes and other bills based on where your closing date falls within the month/payment cycle. As some owners prepay these services, the adjustment could be quite costly.
Most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and costs approximately $200-300.
A professional inspector offers an objective visual examination of the physical structure and systems within a house. It’s not mandatory, but it’s great protection for your investment should you choose to have one.
The cost range is $350-$600.
Still feeling overwhelmed at the prospect of closing costs and what you can expect? Let me help you determine the closing costs you’ll have to pay based on your specific property. Give me a call at 250-826-3111 or contact me through my online contact form to start the process today.
Let’s get your application off the ground.
