As a first time homebuyer you know you’ll need a down payment, but there are several other costs you may not realize you should budget for. Here’s the lowdown on common closing costs Canadian first time homebuyers may overlook.
Lawyer’s and/or Notary Fees Plus GST
Lawyer’s prepare and register purchase documents and mortgage documents when you buy a home, and lawyers cost money! Depending on your province, expect to pay anywhere between $500 and $1500 in legal fees when you buy your first home, and don’t forget to add your provincial GST.1
Disbursements and Adjustments
Along with the lawyers’ fees for their services, first time buyers should also budget for disbursements and adjustments. Disbursements are fees or charges lawyers incur on your behalf for things like government registration fees, search fees, and courier or mail fees.
Adjustments refer to calculations that account for expenses the home seller may have prepaid, such as property taxes or utilities.
As a first time homebuyer you know you'll need a down payment, but there are several other costs you may not realize you should budget for.
Title Insurance
While it isn’t mandatory, title insurance protects you against losses related to your home’s ownership/title.1 On a new purchase of $500,000, your title insurance would cost about $300, according to a recent MoneySense article. Learn more about title insurance to decide if it’s right for you, and ask your lawyer for a quote on title insurance for your property.
Land Transfer Tax
Land transfer taxes and/or transfer fees on the purchase of a home vary by purchase price, province and if you’re in Ontario, even by regional location. Toronto first time homebuyers pay an additional municipal land transfer tax.2 And as of April 1, 2016, Torontonians also pay an additional $84.75 ($75 fee + GST) as a municipal “administration fee”.3
However there may be some land transfer tax relief in Ontario and British Columbia, which offer a land transfer tax rebate for qualified first time homebuyers.
Estimate your taxes with Realtor.ca’s handy Land Transfer Tax Calculator.
Home Inspection Fee
Before buying a house, many homebuyers today hire a home inspector to assess the operating and structural systems of a home. A home inspection may reveal potentially costly renovations and repairs that purchasers should know about before finalizing their agreement to buy. Depending on the home size and location, expect to pay between $300 and $500 for a home inspection in Canada.4
While closing costs vary greatly depending on your situation, location, and purchase price, CMHC recommends budgeting between 1.5 and 4 percent of your home’s purchase price for closing costs.5 Lastly, don’t forget house-specific costs such as buying appliances and cable and internet hookup fees – they can quickly add up and take a bite out of your homebuying budget.
Sources:
1. Financial Services Commission of Ontario – Understanding Title Insurance (PDF)
2. National Post, December 1, 2015 – Ontario won’t expand the municipal land transfer tax beyond Toronto’s borders
3. Toronto Star, March 26, 2016 – Fee for land transfer registration amounts to tax on a tax
4. HGTV – Do I Really Need a Home Inspection?
5. Canada Mortgage and Housing Corporation – What are the General Requirements to Qualify for Homeowner Mortgage Loan Insurance?
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.
