News & Resources

12 Ways Home Closing Costs Can Surprise You

Sept. 24, 2013
4 mins
A couple sign documents with a realtor

You've heard this before: the cost of buying a house is the price you've negotiated, plus a whole lot more. Home closing costs have put many a first-time home buyer in a bad mood - but, they're necessary. When you buy a home, closing costs cover the gamut of the services you need to finalize the deal.

They include:

Legal fees: You need a real estate lawyer to transfer all the paperwork and that will run you around $2,500.

HST: Usually, you just have to pay HST if you are buying a brand new home. Always ask if it applies to your purchase, in your province.

Title insurance: This one-time fee seems odd, but it covers you later if you find out your fence is too low or your garage encroaches on the neighbour's property; the insurance will cover renovations and repairs for such problems. It's usually $250. Some buyers may get a property survey for around $1,000 when they buy — or they rely on the title insurance to deal with potential problems and skip this expense.

Home inspection. This usually runs around $500, but it's a not-to-be-missed step - it can identify issues with the home that may prove costly in the long run, like mould or structural problems. Such an inspection can also give you leverage as a buyer, putting the seller on the hook for these repairs as part of your closing deal.

Mortgage loan insurance: If you're paying less than 20% down on your home, you'll be required to take out mortgage insurance, offered through the Canadian Mortgage and Housing Corporation, which is a Crown corporation, or a private insurer like Genworth. The amount varies based on the amount you pay upfront, as well as the purchase price of your home. Check out this handy CMHC calculator to determine what you'll pay in insurance premiums.

Real estate agent's commission: This is actually paid by the seller. So if you're buying AND selling a home, take into account you'll have to pay out about 5% (or less, or more, depending on where you live) in commission. So for a $350,000 home, an agent gets $17,500.

Land transfer tax: This varies from province to province, and first-time buyers often can get much of the cost refunded. Here's another great calculator tool to determine what taxes will be like in your location.

Don't Get Caught In Clauses

Costs aside, the wording of your sale can make a big difference later on. Anything in the sale agreement is difficult to enforce past midnight on the day you close. So check to be sure everything is as it said it should be in the sale agreement. It's also important to know when exactly your home closes - or risk being sued like this Burlington, ON man, who attempted to pull out of a sale due to lack of financing. While he protested that the deal had technically fallen through already when he retracted at four p.m. on closing day, the judge presiding over the case felt 11:59 p.m. was the official cut off, forcing him to pay his seller losses.

Reiterate Your Repairs

If your home inspection revealed concerns and you asked the seller to fix them, you need to be clear in the wording of your sale that these are covered. What if the seller fixed the roof as asked, but did a shoddy job that leaked six months later? Be sure the wording in the contract is very clear and that you inspect your home carefully as soon as you get possession. Experts now suggest getting the money for a repair knocked off the sale price so you can do the work yourself and be sure it's been done properly.

Are Appliances Included?

Be sure your sale agreement states what's to be in the house when you get it and if they must be in working order. Check immediately to see if the appliances, built-ins and things such as lawnmowers are still there and if they work.

Pools and Hot Tubs

There's huge room for error here: buying a home in fall or winter makes it difficult to assess if a pool is truly working. Get the full history of the pool: when it was last repaired, the age of the lining if the fence has passed inspection. Check yourself the day you get the house. The same goes for a hot tub. Inevitably these things will require maintenance over time as you own the home, but you'd hope they're in good shape when you get them, as promised. Indeed, it's all as promised, and it seems like your seller would do right by you. But when the stakes and costs are high, you can never be too sure. Work with your lawyer to be sure everything is accounted for so you can truly enjoy your new home.    

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