Understanding Closing Costs in Canada
When buying or selling a home in Canada, closing costs are an essential aspect of the transaction. These are the fees and expenses that must be paid when the sale is finalized, and understanding them can help you budget more effectively and avoid any last-minute surprises.
Costs Pertaining to Your Mortgage Loan
As a homebuyer, several loan-related costs are typically required at closing, including:
- Mortgage Application Fee: Some lenders charge a fee when you apply for a mortgage.
- Appraisal Fee: The cost of having the property appraised to determine its market value, which is often paid at closing.
- Credit Report: A fee charged by the lender to check your credit history.
- Interest Adjustment: This covers the interest accrued between the closing date and the date of your first mortgage payment.
- Mortgage Default Insurance (CMHC Insurance): If your down payment is less than 20%, you’ll need to pay for mortgage default insurance, which can be added to your mortgage or paid upfront at closing.
Taxes and Fees You May Be Responsible for at Closing
- Property Taxes: You may need to reimburse the seller for any property taxes they’ve prepaid for the period after you take ownership.
- Land Transfer Tax: Most provinces and some cities charge a land transfer tax, which is based on the purchase price of the property. First-time homebuyers may qualify for a rebate on this tax.
- Title Insurance: Protects against any issues with the property’s title that may arise after the purchase.
- Legal Fees: You’ll need to pay a real estate lawyer to handle the closing process, including reviewing the contract and ensuring all documents are in order.
Insurance Costs Due at Closing
- Homeowners Insurance: Required by lenders to protect the property from risks such as fire, theft, and natural disasters.
- Title Insurance: While not mandatory, title insurance is often recommended to protect against potential legal issues with the property title.
- Condo or Strata Insurance: If you’re buying a condo, you may need to pay for condo or strata insurance.
Sellers: What to Expect
As your real estate agents, we will work diligently to negotiate the best possible sales price for your property while also aiming to minimize your closing costs. Once an agreement is reached, we will walk you through each cost so you know exactly where your money is going.
Buyers: What to Expect
When purchasing a home in Canada, your lender will provide a “Mortgage Commitment Letter” that includes details about your mortgage and an estimate of your closing costs. This estimate should be accurate to prevent surprises when you reach the closing table. While we do not receive a copy of this estimate, we’re here to help you review it and answer any questions you may have.
If you have any further questions about closing costs or need more information on any aspect of the home buying or selling process in Canada, please feel free to reach out using the contact form below. We’re here to help you navigate the process with confidence.