Your closing costs will depend on the purchase price of your home (land transfer tax) and how much down payment you are putting down (CMHC)
For first-time buyers buying a modest home, I estimate under 1% of the purchase price as all costs, excluding CMHC insurance and the down payment.
Here is a list of all possible expenses that can pop up.
Appraisal
Approximate Cost: $350-$450
This is the fee for determining the property lending value for mortgage purposes. This value may or may not be the same as the purchase price of the home.
Home inspection fees (may not apply if you are purchasing a new home)
Home Inspection
Approximate Cost: $350-$450
The home inspector evaluates the structures and systems that make up your home and provides you with a written report. While not mandatory, many people make a professional home inspection a condition of their Offer to Purchase.
Property Survey
Approximate Cost: $750 - $1,200
A survey indicates the boundaries and measurements of the land and positions of major structures, and any registered or visible easements (such as a driveway) or encroachments (such as a neighbour’s fence) on the property.
Land Transfer Tax
Up to $55,000 X 0.5% of total property value
From $55,000 to $250,000 X 1% of total property value
From $250,000 to $400,000 X 1.5% of total property value
From $400,000 up X 2% of total property value
This is charged whenever a property changes hands and is based on the purchase price. Most provinces in Canada charge a provincial land transfer tax and some cities also charge an additional municipal land transfer tax. In some cases, first time homebuyers may be exempt from a portion of this cost. You can obtain further details about land transfer tax on provincial or municipal websites to help you estimate the cost.
Land Transfer Tax Rebates: First Time Home Buyers
If you are a first-time home buyer you are eligible for rebates for both the Municipal and Provincial Land Transfer Tax. Provincial Land Transfer Tax does not apply in Hamilton.
Provincial Land Transfer Tax (PLTT): Maximum $2000
Legal fees and related expenses: Approximate Cost: $1,300 – $2,500
These fees vary by province and are subject to HST where applicable. Ensure your lawyer’s quote includes all related expenses and disbursements, not just legal fees. Make sure your interests are protected by discussing your Offer to Purchase with your lawyer or notary prior to signing.
Title Insurance
Approximate Cost: $400
Title insurance covers problems that may arise due to encroachment issues (for example, a structure on your property is actually part of your neighbour’s property and needs to be removed), existing liens against the property’s title, title fraud, undischarged mortgages and other issues relating to the property’s previous owners.
Insurance costs for high-ratio mortgages (CMHC) Canada Mortgage and Housing Corporation
Usually, mortgage default insurance premiums range between 0.5% and 2.75% of the principal plus applicable fees (may be subject to provincial sales tax which cannot be added to the mortgage amount)
CMHC (Canada Mortgage and Housing Corporation Insurance)
If your down payment is less than 20% of the purchase price of your home, you must pay a one-time insurance premium on your mortgage amount. You can make arrangements to pay the premium to CIBC before closing, or it can be added to the principal amount of your mortgage. If it is added to the principal amount of your mortgage, you will pay interest on it at the same interest rate you pay on the principal amount of your mortgage.
Loan–to-Value Premium on Total Loan**
Up to and including 80% 2.40%
Up to and including 85% 2.80%
Up to and including 90% 3.10%
Up to and including 95% Traditional Down Payment 4.00% 4.50%
Down Payment which accompanies accepted Offer to Purchase
Minimum ten thousand dollars and upwards on larger purchases.
Interest Adjustments
Approximate Cost: $100 - $1,000
You will need to pay interest on any gap between the closing date of the purchase and the first payment date of the mortgage. You can avoid an interest adjustment by arranging to make your first mortgage payment exactly one payment period after your closing date.
Prepaid Property Tax and Utility Adjustments
Approximate Cost: $400 - $500
You will be required to reimburse the vendor for any prepaid property taxes or utility bills.
Home insurance $1,000 and upwards per year
Protection for your home and contents.
Mortgage life insurance Variable. A better bet than buying insurance from the bank is buying from your car insurer. The difference is that upon your death, the bank pays out the outstanding balance of the mortgage, and car insurance pay out the original amount you borrowed.
Costs vary on your age, health, smoker, and so forth but can be conveniently included in your regular mortgage payment.
Borrow to empower, not to enslave!!