What is a Closing Cost in Canada? 

When buying a home in Canada, one of the most important — and sometimes overlooked — expenses you’ll encounter is the closing cost. This is the collection of charges that a homebuyer (and sometimes the seller) must pay in addition to the property’s purchase price, typically due at the time of closing the real estate transaction.

What Are Closing Costs?

Closing costs refer to all the additional fees incurred to finalize a home purchase. These costs typically range from 1.5% to 4% of the home’s purchase price. For example, if you’re buying a $600,000 house, you should be prepared to pay anywhere from $9,000 to $24,000 in closing costs.

Common Closing Costs in Canada

Here are some of the most common components of closing costs:

  1. Land Transfer Tax (LTT)
    This is a significant cost in most provinces and municipalities. In Ontario, for example, both a provincial and municipal LTT may apply, especially in Toronto. First-time homebuyers may be eligible for rebates.

  2. Legal Fees
    You’ll need a real estate lawyer to handle the transaction, including reviewing the contract, title search, and transferring funds. Legal fees typically range from $1,000 to $2,500.

  3. Home Inspection Fees
    While not mandatory, a home inspection is highly recommended. This costs about $300 to $600 and can save you from costly surprises later.

  4. Appraisal Fee
    Some lenders require an appraisal to confirm the property’s value, which costs around $300 to $500.

  5. Title Insurance
    Title insurance protects you against potential disputes over property ownership. This one-time cost is usually between $250 and $500.

  6. CMHC Insurance (if applicable)
    If your down payment is less than 20%, mortgage default insurance is required. While the premium is usually added to your mortgage, the provincial sales tax on the premium (e.g., in Ontario) must be paid at closing.

  7. Prepaid Utilities, Property Taxes, or Condo Fees
    If the seller has prepaid these, you may need to reimburse them for the pro-rated amount.

Why It Matters

Understanding and budgeting for closing costs ensures a smoother home-buying experience. It’s wise to set aside funds in advance and speak with your lender or lawyer to get an accurate breakdown before the closing day.

In summary, closing costs are a necessary part of buying a home in Canada, and planning for them can prevent financial surprises when it matters most.