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What are the Most Common Closing Costs?

Don’t forget about closing costs when buying a home. Closing costs are money you must have set aside on top of your deposit and down payment. Let’s look at the most common closing costs paid by homebuyers.

closing cost

Home Inspection

If you’re buying a property, a home inspection is a must. But not just by anyone. While it can be helpful to have your handy uncle walk through the property and share his two cents, you’ll also want to make sure you have a home inspector walkthrough as well. And not just any home inspector. You want a certified home inspector. Your home inspector has certified means that they are fully trained and licensed. That way, you know you’re getting the information you can trust and rely on to make quite possibly the single biggest purchase of your lifetime.

Waiving the home inspection can be risky. If you’re in a competitive home buying situation, getting a home inspection in advance is a good idea. Sure, you run the risk of not being successful on your offer, but at least you have the peace of mind knowing that you’re most likely buying a solid property.


Homebuyers often confuse the appraisal and home inspection when they are two separate things. A home inspection is for your own personal benefit. It helps you decide whether to go ahead with the purchase of a property.

An appraisal, on the other hand, is for your lender’s benefit. The lender uses it to determine the property’s value and condition. Your home’s value is usually determined based on comparable sales, but sometimes a property’s value is based on cost.

Lenders have a list of approved appraisers. Your mortgage professional will choose an appraiser with a good reputation who appears on this list.

If your home is appraised for more than it’s worth, then that’s great. You’re getting a good deal on the home. However, if it’s appraised for less, that’s when you would need to come up with the shortfall if you’re making the minimum down payment.

As the home buyer, you’re responsible for paying for the appraisal. It’s a good idea to budget at least $300 or $400 for it.

Real Estate Lawyer Fees

Real estate lawyer fees are another big one. Buying a home is a legal transaction. As such, you need a real estate lawyer to assist you with the legal paperwork. Your real estate lawyer does several important things, including preparing legal documents, doing a title search to make sure the property is free and clear of any encumbrances and giving you the keys to your new home. You’re looking at about $2,000 in legal fees for a home purchase, although legal fees vary from lawyer to lawyer.

Mortgage Default Insurance​

When buying a primary residence with less than 20% down, you’re required to take out mortgage default insurance. Mortgage default insurance protects your lender in case you default (fail to repay) your mortgage according to its terms and conditions.

The good news for cash-strapped first-time homebuyers is that you don’t have to pay for the cost of mortgage default insurance upfront. Mortgage default insurance premiums can be added to your mortgage balance. You then make payments on that balance, including mortgage default insurance premiums, over the life of your mortgage.

There is an upfront cost if you live in certain provinces. In Saskatchewan, Manitoba, Ontario and Quebec, you’re required to cover the PST upfront on your mortgage default insurance premiums. The PST cannot be added to your mortgage, so it’s important to budget for that so you’re not left short of funds on your closing date.

Land Transfer Tax

Perhaps the highest closing cost is the land transfer tax. The land transfer tax is a tax your province or municipality charges when buying real estate. Different provinces charge different amounts, but it’s an amount you must pay upon purchasing a home.

Here’s a fun fact. Toronto is the only municipality in Canada that charges a municipal land transfer tax. That means if you’re buying in Toronto, you have to pay a double land transfer tax: a municipal one and a provincial one.

The good news is that first-time homebuyers catch a break on land transfer tax. Depending on where you’re buying and the purchase price of your home, you may receive a full or partial refund of your land transfer tax. Your real estate lawyer can help you determine the refund you’re entitled to.

Prepaid Expenses

Prepaid expenses are closing costs new homebuyers often overlook. If the homeowner has paid property taxes for the next six months, you might think you catch a break when that isn’t the case. There’s no such thing as a free lunch when it comes to finances.

The existing homeowner will be credited for any expenses paid in advance before closing day. This is mainly for utilities and property taxes. Your real estate lawyer will calculate them for the statement of adjustments.

As the homebuyer, you’ll need to fork over the cash as part of your closing costs to cover those prepaid expenses. It’s a good idea to budget $2,000 to $4,000 for them to be on the safe side because you won’t know what these expenses are until your lawyer calculates the numbers and advises you shortly before closing.

Moving Fees

And then there are moving fees.

If you’re moving from an apartment to a condo, you might get away with renting your truck and doing it yourself.

However, if you’re moving from a house to an even bigger house, you’ll more than likely want to hire professional movers.

Do your research and ask family and friends for recommendations. This will improve your chances of hiring reputable movers that show up on time and take good care of your stuff.

The Bottom Line

Do you need clarification on any of the closing costs? Speak with our mortgage experts for a helping hand. We’d be happy to explain anything in further detail as needed.

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