Closing costs

Your home buying budget has to cover more than just your mortgage and your down payment. Remember to factor in closing costs, which include the land transfer tax and legal fees. You need a rough idea of how much all these costs will be so you’re not faced with an unpleasant surprise as you’re getting ready to move into your new place!

Closing costs traditionally require a cash outlay on or just after closing day, so in addition to your down payment, you need to budget for these expenses as well.

Watch out for that land transfer tax

By far the biggest and least expected closing cost you’ll have to pay is the land transfer tax. It’s calculated as a percentage of the purchase price and varies by province, although some cities levy a land transfer tax as well.

In locations where two land transfer taxes apply, like in Toronto, homebuyers can end up paying taxes that amount to over 3% of the house’s purchase price. And these taxes have to be paid on closing -- you can’t roll the cost into your mortgage.

Don’t forget about your other closing costs

Homebuyers also need to cover administrative costs, like legal fees, title insurance, and land surveys. If your down payment is less than 20% ,you also have to pay for mortgage insurance through the CMHC. The cost of this insurance is usually equal to about 2% of the purchase price. While you can roll your mortgage insurance into your mortgage, you will have to cover the sales tax by the closing date.

Most services related to your real estate purchase will be subject to the sales taxes payable in your province. You’ll have to pay sales taxes for legal, administrative, and insurance services – you’ll even pay tax on the commission charged by your realtor! On large transactions, this tax can total to thousands of dollars.

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