Glossary
Closing Costs
Closing costs are the one-time fees, taxes, and charges paid on top of a home's purchase price, separate from the down payment..
Closing costs are the one-time fees, taxes and charges a home buyer pays on top of the purchase price, usually due on or before the completion date. They are separate from the down payment, must generally come from your own funds, and can add meaningfully to the cash you need before you get the keys.
What is usually included
The exact list depends on the province, the property type and how the purchase is financed. Common items include:
- Land transfer tax, called property transfer tax in British Columbia and the "welcome tax" in Quebec, calculated on the purchase price under provincial rules that may include first-time buyer rebates.
- GST or HST on a newly built home, which may be partly offset by the GST/HST New Housing Rebate.
- Mortgage default insurance premium when the loan-to-value ratio is above 80%, typically added to the mortgage balance rather than paid in cash.
- Legal or notary fees, title insurance, a home inspection, an appraisal if the lender requires one, and any lender origination or commitment fee.
- Adjustments on the statement of adjustments, such as prepaid property tax or condo common expenses the seller has already covered.
Why closing costs matter to a borrower
Lenders decide how much you can borrow using ratios such as GDS and TDS, but they do not advance money for most closing costs. A buyer who budgets only for the minimum down payment can be short of cash at completion, which may delay a closing or force a rushed loan. Because the amounts are driven by the purchase price, the province and the property type, two buyers with similar mortgages can need very different amounts of cash.
Sorting the costs into three buckets helps:
- Government: land transfer tax, GST/HST on new builds, registration fees.
- Lender: default insurance premium, appraisal, origination or commitment fees.
- Third parties: lawyer or notary, title insurance, inspection, moving costs.
Planning ahead
Ask your lender, lawyer or notary for a written estimate early, and confirm current tax rates and rebate rules with the relevant provincial ministry and with CMHC for insurance questions. The federal Home Buyers' Plan and the First Home Savings Account can help some buyers build the cash they need, and a closing costs calculator can help you total the estimate. No two transactions are identical, so treat any estimate as a starting point rather than a final figure.
Frequently asked questions
How much are closing costs when buying a house in Canada?
There is no single figure. Closing costs are usually a percentage of the purchase price and vary by province, property type and financing. Land transfer tax, legal fees, title insurance, a home inspection and statement-of-adjustments items are typical, and mortgage default insurance applies to high-ratio purchases. Ask your lender or notary for a written estimate based on your specific transaction.
Can closing costs be added to a mortgage?
Most closing costs must be paid in cash and cannot be added to the mortgage. The main exception is the mortgage default insurance premium on a high-ratio purchase, which is typically financed into the loan balance. Some lenders offer a purchase-plus-improvements option for renovations, but it does not cover taxes or legal fees.
Are closing costs tax deductible in Canada?
Generally no for a home you live in. The Canada Revenue Agency does not let you deduct the everyday costs of buying a principal residence. Some costs may be relevant where a property is bought to earn rental or business income, so confirm the current rules on the CRA website or with a qualified tax professional.
Sources
Related terms
- Down Payment — A down payment is the portion of a home's purchase price a buyer pays upfront, reducing the amount borrowed through a mortgage.
- Land Transfer Tax — A provincial tax on transferring property title, paid by the buyer at closing and calculated as a percentage of the purchase price.
- Mortgage Default Insurance — Insurance that protects the lender, not the borrower, when a high-ratio mortgage goes into default and the home sale does not repay the debt.
- Statement of Adjustments — A Statement of Adjustments is the closing document that lists the amounts each party to a property transaction owes or is owed, fixing the final cash balance.
- GST/HST New Housing Rebate — A federal rebate that returns part of the GST or HST paid on certain new or substantially renovated homes used as a primary residence.