Closing costs on a new home in Canada refer to the fees and expenses that are associated with the purchase and closing of a new home. These costs can vary depending on a number of factors, including the price of the home, the location of the property, and the type of mortgage being used to finance the purchase.
In general, closing costs for a new home in Canada can include legal fees, land transfer taxes, mortgage insurance, and other miscellaneous fees such as appraisal fees and title insurance. Some of these costs may be negotiable or may be covered by the seller, while others will need to be paid by the buyer.
It is important for buyers to budget for closing costs and to be aware of what costs are involved in the home buying process. It is also a good idea for buyers to shop around and compare quotes from different professionals and service providers to get the best rates and terms.
How much are closing costs in Canada?
When buying a new home in Canada, there are several closing costs that you may be responsible for paying. These costs can vary depending on the price of the home, the location of the property, and other factors. Here is a breakdown of some common closing costs that you may encounter when buying a new home in Canada:
Legal fees when buying a home
Legal fees are charges for the services of a lawyer or notary who will handle the legal aspects of the home purchase. These fees can vary, but you can expect to pay anywhere from $1,000 to $2,500 for legal services.
Land Transfer Tax
Land transfer taxes are taxes that are paid when ownership of a property is transferred from one person to another. These taxes are based on the value of the property and can vary depending on the location of the property. In general, land transfer taxes in Canada range from 0.5% to 2% of the purchase price of the home.
Mortgage Insurance
If you are putting less than 20% down on a home, you may be required to purchase mortgage insurance. This insurance protects the lender in case you default on your mortgage. The cost of mortgage insurance is usually added to your mortgage payments and can range from 0.5% to 3.5% of the mortgage amount.
Other closing costs and fees
There are also other miscellaneous fees that you may be responsible for when buying a new home in Canada. These can include appraisal fees, title insurance, and other closing costs such as courier fees and disbursements. These fees can vary, but you can expect to pay several hundred dollars for these costs.
It’s important to keep in mind that these are just estimates, and the actual closing costs that you will need to pay may be different depending on your specific situation. It is a good idea to budget for closing costs and to be aware of what costs are involved in the home buying process. It is also a good idea to shop around and compare quotes from different professionals and service providers to get the best rates and terms.
FAQ on Closing Costs
There are several companies in Canada that provide mortgage insurance. Some of the largest and most well-known mortgage insurance providers in Canada include:
- Canada Mortgage and Housing Corporation (CMHC)
- Genworth Canada
- Canada Guaranty Mortgage Insurance Company
These companies offer mortgage insurance to lenders, which is then passed on to borrowers who are required to purchase mortgage insurance because they are putting less than 20% down on a home. Mortgage insurance is designed to protect the lender in case the borrower defaults on their mortgage, and it is typically added to the borrower’s mortgage payments.
In addition to these companies, some banks and other financial institutions also offer their own mortgage insurance products. It’s a good idea to shop around and compare quotes from different mortgage insurance providers to find the best rate and coverage for your needs.
A statement of adjustments, also known as a closing statement or settlement statement, is a document that outlines the various costs and expenses associated with the purchase of a home. It is typically prepared by the lawyer or notary handling the closing of the home, and it is used to reconcile the purchase price of the home with any outstanding debts or liens on the property.
The statement of adjustments typically includes a list of all closing costs, such as legal fees, land transfer taxes, and other miscellaneous expenses. It will also show any adjustments that need to be made to the purchase price of the home, such as the prorated amount of property taxes or utility bills. The statement of adjustments is used to calculate the final purchase price of the home and to ensure that all outstanding debts and expenses are paid in full at the time of closing.
It is important for buyers to review the statement of adjustments carefully before closing on a home, as it provides a detailed breakdown of all costs and expenses associated with the purchase. This can help buyers to understand the full cost of purchasing a home and to ensure that they have budgeted appropriately.
Title insurance is a type of insurance that protects the owner of a property from financial loss due to defects in the title to the property. Title insurance covers a variety of issues that can arise with a property’s title, such as liens, encumbrances, and other defects that may not have been discovered during the title search process.
In general, title insurance is optional, but it is often recommended for buyers of real estate, especially if they are purchasing a home in an area with a high risk of title defects. Title insurance can provide peace of mind and financial protection for homeowners, as it can help to cover the costs of defending against any challenges to the title of the property.
If you are considering purchasing title insurance, it is a good idea to shop around and compare quotes from different insurers to find the best coverage and rate for your needs. You should also consider consulting with a lawyer or real estate professional to determine if title insurance is necessary in your specific situation.
It is generally a good idea for buyers to pay for a home inspection when purchasing a new home. A home inspection is a thorough examination of a property by a professional home inspector, and it can help to identify any potential issues or problems with the property. This can be valuable information for buyers, as it can help them to make an informed decision about whether to purchase the home and to negotiate any necessary repairs or credits.
The cost of a home inspection can vary depending on a number of factors, such as the size of the home, the location of the property, and the specific services being offered. In general, you can expect to pay anywhere from $300 to $600 for a home inspection.
Whether you have to pay the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST) when buying a home in Canada depends on the location of the property and the type of transaction.
If you are buying a new home that has never been occupied before, you will generally be required to pay the GST or HST. The GST is a 5% federal tax that applies to most goods and services in Canada, including the sale of new homes. The HST is a combination of the GST and a provincial sales tax, and it applies in certain provinces in Canada.
If you are buying a resale home (i.e., a home that has previously been occupied), you may not be required to pay the GST or HST. In general, the GST or HST does not apply to the sale of used homes.
It is important to note that the GST or HST may be applicable to other costs associated with buying a home, such as legal fees, home inspections, and other services. It is a good idea to budget for these taxes and to be aware of what taxes are applicable in your specific situation. You should also consider consulting with a lawyer or real estate professional to get more information about GST and HST when buying a home in Canada.
