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Mortgage Closing Costs: A Helpful Guide For Canadians

Purchasing a home can be both an exciting and overwhelming process. One aspect that often causes confusion for first-time homebuyers is mortgage closing costs. These expenses are part of the final steps in the home-buying process and are essential to understand as they can significantly affect your overall budget. In this article, I’ll explain the most common closing costs and share some tips on how you can lower your closing costs next time you buy a house.

What Are Mortgage Closing Costs?

Mortgage closing costs refer to the fees and expenses you’ll need to pay when finalizing your home purchase. These costs can vary, but they typically include items such as land transfer taxes, legal fees, appraisal fees, and title insurance. It’s important to familiarize yourself with these expenses before buying in order to be fully prepared and avoid any surprises when it’s time to close the deal on your new home.

Closing costs can vary, but they typically range from 1.5% to 4% of the purchase price of the home. Some closing costs only apply in certain situations. One example is mortgage default insurance, which is only required if your down payment is less than 20% of the purchase price.

With that in mind, let’s take a closer look at the most common closing costs in Canada.

Common Closing Costs In Canada

Legal Fees

You’ll need to work with a real estate lawyer to help with closing the purchase of your home. Legal fees typically range from $500 to $1,500 and include title searches, document preparation, and other services.

Land Transfer Tax

When buying a property, you’ll need to pay a land transfer tax (LTT). This tax varies by province, and in some cases, there might be a municipal tax as well. For example, the City of Toronto levies an additional land transfer tax over and above the provincial LTT in Ontario. However, first-time homebuyers may be eligible for a rebate. Before buying, remember to look up the land transfer tax rates for your province and city.

Property Tax Adjustments

Since property taxes are often paid in advance or arrears, adjustments will be made between seller and buyer to ensure each party covers their respective portion of the taxes. As the homebuyer, you may need to credit the seller for property taxes that they paid in advance.

CMHC Mortgage Insurance

For high-ratio mortgages (less than 20% down payment), you’ll need mortgage insurance. Premiums depend on the amount of the mortgage and down payment and can range from 0.6% to 4.5% of the mortgage amount. Most borrowers finance the CMHC premium into their mortgage, so the amount isn’t included in your actual closing costs. However, you do have the option to pay the CMHC premium upfront at the time of closing. Note that provincial sales tax is payable on the mortgage default premium.

Home Inspection Cost

Before you buy a property, you should always obtain a home inspection from a licensed home inspector. They’ll ensure that the home is in good condition and point out any potential future repair costs. Home inspection fees typically cost around $300 to $500.

Appraisal Fee

Lenders usually require a property appraisal to verify the value of the home. The homebuyer is usually expected to cover the cost of the appraisal. Fees vary but can range from $300 to $500.

Title Insurance

Title insurance protects you against potential issues such as fraud or property defects not caught during the title search. Though not mandatory, it’s recommended by many experts and costs about $150 to $350. Your lawyer will look after setting up the title insurance.

Rural Property Closing Costs

If you’re purchasing a rural property, you may encounter additional closing costs due to the nature of the property. Examples include well and septic inspections or obtaining surveys to define the property’s boundaries.

Non-Resident Speculation Tax (NSRT)

While this cost won’t apply to most homebuyers, if you’re a non-resident of Canada purchasing property in certain regions in Ontario, you’ll have to pay an additional NSRT of 15%.

Ways To Lower Your Closing Costs

When it comes to your mortgage, closing costs can be a significant expense. Luckily, there are ways you can reduce these costs and save some money. Here are a few tips to help you lower your closing costs:

1. Negotiate with your lender. Once you’ve found a mortgage lender, don’t be afraid to negotiate with them on the closing costs. Some lenders may be willing to waive or reduce certain fees, such as an appraisal fee, especially if you have a good credit score and a solid financial history.

2. Increase your down payment to avoid paying the CMHC mortgage insurance premium. If you can afford it, increasing your downpayment to at least 20% means that you no longer have to pay for mortgage default insurance. In addition to lowering your closing costs, you’ll benefit from having a smaller mortgage amount, which could save thousands of dollars in interest charges over the years. You may even be able to pay off your mortgage early.

3. Consider a no-closing-cost mortgage. It’s not common, but sometimes lenders will offer you cash back as a promotional offer for new mortgages. For example, they may pay you $1500 as a cash rebate upon closing if you take out a mortgage of a certain amount, say $300,000 or more. You can take advantage of these types of offers to offset your closing costs, but make sure you do the math and compare interest rates between lenders to determine if this is the right choice for you.

4. Keep an eye on third-party fees. Third-party fees, such as appraisal, home inspection, or legal fees, can differ significantly between providers. Shop around and choose the best option for your budget. For example:

  • Compare lawyer fees
  • Get multiple quotes for appraisals and home inspections

Remember, reducing your closing costs can make a significant impact on your overall mortgage expenses. It’s worth taking the time to explore these options and negotiate with your lender to save money wherever possible.

Who Pays for Closing Costs in Canada?

Closing costs are typically the responsibility of the home buyer. As a buyer, it’s important to budget for these expenses, which can range from 1.5% to 4% of the purchase price. For instance, if you’re buying a $300,000 home, you should allocate between $4,500 and $12,000 for closing costs.

First-time home buyers often benefit from specific programs and rebates designed to ease the financial burden of homeownership. For example, you may be eligible for a land transfer tax rebate or a first-time home buyer tax credit. Make sure to research and take advantage of any applicable incentives in your area.

Sellers generally don’t pay for the buyer’s closing costs. Nevertheless, sellers do incur costs, such as the real estate commission (typically around 5% of the sale price) and legal fees. The seller may also need to pay for any repairs or updates recommended after a home inspection.

As a homebuyer in Canada, you should anticipate paying for the majority of closing costs, while sellers cover their own expenses related to selling the property. Remember to budget accordingly and explore any available programs or rebates for first-time home buyers to mitigate costs.

Key Takeaways

  • Mortgage closing costs are essential fees that arise in the final stages of buying a home.
  • These costs can include land transfer taxes, legal fees, appraisal fees, and title insurance.
  • Being familiar with common closing costs can help you better prepare for your home purchase.

The Bottom Line On Closing Costs

When it comes to understanding the total closing costs of your home purchase, it’s important to be well-informed and prepared. Setting aside a proper budget can help you avoid any unwelcome financial surprises. Keep in mind that closing costs can range between 1.5% to 4% of the home’s purchase price. So, for a $300,000 home, you should budget anywhere from $4,500 to $12,000.

Also, as you budget for your home purchase, don’t forget to consider your mortgage payment. This will be a recurring monthly expense, and it’s crucial to make sure it fits within your overall financial plan. Keep in mind that the principal and interest portions of your mortgage payment can change over time, especially if you have a variable rate. So, it’s wise to factor in potential fluctuations when creating your budget.

Lastly, remember that your first mortgage payment could be due sooner than you’d anticipate. Depending on your lender, the due date could be as early as 30 days after closing. Therefore, it’s essential to have the necessary funds ready well in advance so that you can start your homeownership journey on a positive note.

In summary, being well-prepared and informed about closing costs, mortgage payments, and budgeting can make your home-buying experience a smooth one. By taking advantage of helpful tools like closing costs calculators and diligently considering each expense, you can ensure a successful transition into your new home.


What are common components of closing costs?

Closing costs are the various fees and expenses associated with finalizing a mortgage. Some common components include land transfer tax, legal fees, title insurance, home inspection fees, and appraisal fees. These costs can vary, so it’s essential to budget 1.5% – 4% of your property’s purchase price for closing costs.

Are there any ways to reduce closing costs?

As mentioned earlier in the article, there are a few ways you can potentially reduce your closing costs: Shop around to various mortgage lenders, lawyers, appraisers, and home inspectors, and negotiate fees where possible. And if you’re a first-time homebuyer, find out if you qualify for any government programs or rebates aimed at reducing closing costs.

Who pays closing costs in Canada?

In Canada, both the buyer and the seller have closing costs to pay. The buyer’s costs typically include land transfer tax, legal fees, title insurance, home inspection, property valuation, and mortgage default insurance, if applicable. The seller is responsible for real estate commissions, legal fees, and adjustments for prepaid expenses such as property taxes.

Are closing costs negotiable?

Yes, some closing costs can be negotiable, but the success of negotiation depends on various factors. Some fees, like government taxes or prepaid expenses, are fixed and non-negotiable. However, other fees and charges – such as legal fees, property valuation, and title insurance – can sometimes be negotiated, waived, or reduced.

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