Closing Costs When Buying a Home in Canada: What First-Time Buyers Need to Know

When you’re buying your first home, the purchase price isn’t the only cost you need to consider.

Beyond your down payment, there are several other expenses that can add up quickly. Understanding these closing costs when buying a home in Canada can help you build a realistic budget and avoid surprises on closing day.

Here are some of the most common costs first-time homebuyers should consider.

1. Your Down Payment

Your down payment is usually the largest upfront expense when buying a home.

In Canada, the minimum down payment depends on the purchase price. For properties priced at $500,000 or less, the minimum is generally 5%. For properties above $500,000 and below $1.5 million, the minimum is 5% on the first $500,000 and 10% on the portion above $500,000. Properties priced at $1.5 million or more generally require at least 20% down.

Your down payment also affects whether you need mortgage default insurance, so it’s important to understand how your down payment impacts your overall mortgage costs.

2. Home Inspection and Appraisal Fees

A home inspection can help identify potential problems with the property before you finalize your purchase.

An appraisal may also be required by your lender to help determine the property’s value for mortgage financing.

The cost of both services varies depending on the property, location, and provider, so it’s important to include them in your home-buying budget.

3. Legal Fees and Other Closing Costs

Buying a home requires legal work to transfer ownership and register the mortgage.

You’ll typically need a real estate lawyer or notary, depending on your province and circumstances. You may also encounter additional costs related to title registration, document preparation, and other legal services.

Ask your legal professional for an estimate before closing so you understand what to expect.

4. Land Transfer Tax

Land transfer tax is another important expense when buying a home in Canada.

The amount depends on the property’s purchase price and location. Some provinces have their own land transfer tax systems, while certain municipalities may also charge an additional tax.

For example, homebuyers in Toronto may be subject to both the Ontario provincial land transfer tax and the City of Toronto municipal land transfer tax.

First-time homebuyers may qualify for rebates or exemptions depending on where they live and their circumstances, so it’s worth checking the applicable rules before purchasing.

5. Mortgage Default Insurance

If your down payment is less than 20%, you will generally need mortgage default insurance for a qualifying insured mortgage.

The insurance premium is typically added to the mortgage rather than paid entirely upfront, although the details can vary.

While mortgage default insurance makes it possible for some buyers to purchase with a smaller down payment, it is still an important cost to factor into your overall mortgage calculations.

6. Title Insurance

Title insurance can protect homeowners and lenders against certain risks related to ownership of a property.

Depending on the policy, coverage can include issues such as title defects, certain liens, fraud, or ownership disputes.

Unlike many forms of insurance, title insurance is generally purchased with a one-time premium rather than an annual payment.

Your lawyer or notary can explain whether title insurance is appropriate for your purchase and what your policy covers.

7. Moving Costs and Initial Repairs

Don’t forget about the costs that come after the paperwork is complete.

Moving expenses can vary significantly depending on the size of your move and the distance you’re travelling. You may also need to budget for immediate repairs, painting, appliances, furniture, or other work needed to make the home your own.

These expenses aren’t always included when buyers calculate how much they need to purchase a home, but they can have a significant impact on your first few months of homeownership.

How Much Money Do You Really Need to Buy a Home?

The purchase price is only part of the equation.

When planning to buy your first home, consider your:

Down payment + closing costs + moving expenses + initial repairs + ongoing housing costs

Planning for these expenses before you start shopping can help you understand what you can realistically afford and reduce the chance of unexpected costs later.

At Sherwood Mortgage Group, we help homebuyers understand the mortgage process and prepare for the costs involved in purchasing a home.

If you’re a first-time homebuyer in Canada and want to understand how much you may need to budget for your purchase, connect with the Sherwood Mortgage Group team.

The more you know before you buy, the more prepared you’ll be when it’s time to get the keys.