Navigating the Costs of Buying, Selling, and Refinancing a Home in Canada
When it comes to buying, selling, or refinancing a home in Canada, closing costs are an unavoidable part of the journey. These expenses can sometimes catch you off guard if you're not well-prepared. Let’s break down what you need to know about closing costs and give you a clearer picture of what to expect.
What Are Closing Costs in a Real Estate Transaction?
Closing costs are the fees and expenses you must settle when finalizing a real estate transaction. They can vary depending on whether you’re buying, selling, or refinancing a home. Typically, these costs range from 1.5% to 4% of the home’s purchase price for buyers, and for refinancing, they can be a couple of thousand dollars—sometimes added to your loan balance to avoid out-of-pocket expenses.
Common Closing Costs When Buying a Home
Land Transfer Tax: This tax, which varies by province and municipality, is based on the purchase price of your new property.
Cost: From a few hundred to several thousand dollars.
Legal Fees: These fees cover the work of a real estate lawyer or notary who handles all the legal details of the transaction, including title searches and document preparation.
Cost: $1,500 to $3,000 or more.
Title Insurance: This one-time fee protects you against potential issues with the property’s title, such as disputes over ownership. It’s often required by lenders and can also be a wise investment for homeowners.
Cost: $150 to $500 or more.
Property Appraisal: To ensure you’re paying a fair market value, your lender may require an appraisal, especially for conventional or lower loan-to-value mortgages.
Cost: $300 to $600 or more.
Home Inspection: While optional, a home inspection is highly recommended to uncover any potential issues with the property before you commit.
Cost: $500 to $3,000 or more.
Property Tax Adjustments: Depending on your closing date, you might need to reimburse the seller for any prepaid property taxes or receive a credit for unpaid taxes.
Mortgage Default Insurance: If your down payment is less than 20%, you’ll need this insurance, costing between 2.8% and 4% of the mortgage amount. In Ontario, Quebec, and Saskatchewan, provincial sales tax also applies.
Common Closing Costs When Selling a Home
Real Estate Commissions: Sellers typically cover the commission for both their own and the buyer’s Realtors, which ranges from 3% to 5% of the sale price, plus any applicable taxes like GST/HST.
Legal Fees: These fees are for a lawyer or notary who ensures the legal ownership of the property is properly transferred and clears any existing liens or charges.
Cost: $1,000 to $3,000 or more.
Mortgage Discharge Fees: Your lender will charge a fee to close out your existing mortgage.
Cost: $200 to $500.
Mortgage Pre-Payment Charges: If you’re breaking your mortgage term early, you might face penalties, such as three months’ interest or the Interest Rate Differential (IRD).
Repairs and Maintenance (Optional): Any agreed-upon repairs or maintenance that need to be completed before the sale can also add to your costs.
Document Request (Optional): Any permits that you did not keep we may need to request to make for a smooth sale.
Cost: $200 - $800
Staging (Optional): To get more out of the sale, you may want to consider staging. Talk to your Realtor before enlisting a stager.
Cost: $500 to $3,000
Pre-Inspections (Optional): Pre-inspections help get a home sold fast and beat out any objections. It helps show your home has been priced accordingly and shows good faith. It takes out a leg to negotiate on.
Cost: $300 - $800
Closing Costs When Refinancing a Home
Appraisal Fees: Your lender will need an appraisal to determine your home's fair market value during refinancing.
Cost: $300 to $600 or more.
Legal Fees: These cover the legal work required to register your new mortgage and verify property ownership.
Cost: $1,000 to $3,000 or more.
Mortgage Discharge Fees: Charged by your current lender to close out your old mortgage.
Cost: $200 to $500.
Title Insurance: Your new lender might require this insurance to protect against title issues during refinancing.
Cost: $150 to $500 or more.
Mortgage Pre-Payment Charges: If you're paying off your existing mortgage early, pre-payment penalties may apply, typically three months’ interest or the Interest Rate Differential (IRD).
Get Expert Help Today
Understanding closing costs is essential for a smooth real estate transaction. By budgeting for these expenses in advance, you can avoid unexpected financial surprises.
For tailored advice and support on your next real estate move, reach out today! I can connect you with trusted professionals—including mortgage brokers, financial planners, accountants, lawyers, notaries, and inspectors—who can provide specific cost estimates based on your unique situation. Let’s make your real estate journey as seamless and informed as possible!
📍 Vancouver Island Real Estate Co.
💃 Hailey Brontide ~ Realtor with Royal LePage Nanaimo Realty ~ Proudly Serving All of Vancouver Island
📱 (647) 449 - 2679
✉️ vanisl.realestate@gmail.com
🌐 www.vancouverislandrealestatebuyandsell.com
