Closing Costs & Insurance
The Full Cost of Buying a Home in Canada
The cost of buying a home in Canada covers the down payment, closing costs like land transfer tax, CMHC insurance, and moving costs. Here is the full breakdown.
The full cost of buying a home in Canada is much more than the purchase price. Your total outlay combines a down payment, one-time closing costs such as land transfer tax and legal fees, and often CMHC mortgage default insurance, then continues with the ongoing costs of owning and maintaining the property. Budget for all three layers before you make an offer.
The Two Buckets: Upfront Costs and Ongoing Costs
Most buyers fixate on the purchase price, but the money you need arrives in two waves. The first wave is paid before or on closing day: down payment, land transfer tax, legal fees, title insurance, an appraisal, a home inspection, and any mortgage default insurance premium. The second wave starts after you move in: mortgage payments, property tax, home insurance, utilities, maintenance, and any condo or strata fees.
Lenders judge whether you can carry that second wave using GDS and TDS ratios, which compare your housing costs and total debt payments against your income. Federally regulated lenders must also apply the mortgage stress test under OSFI Guideline B-20, and the Bank of Canada policy rate feeds into the prime rate your lender charges. That is why two buyers with the same income can qualify for very different amounts.
Your Down Payment: The Largest Single Outlay
Your down payment is the slice of the purchase price you pay upfront, and it directly reduces how much you borrow. Federal rules set a minimum down payment that depends on the purchase price, and that minimum rises as the price climbs. Ask your lender or check the CMHC website for the minimums that apply to your situation.
Putting down at least 20% typically means you avoid mortgage default insurance. Below that threshold, your lender is generally required to insure the mortgage, and the premium is either added to your mortgage balance or paid upfront.
Two federal programs can help you assemble the down payment. The RRSP Home Buyers' Plan lets qualifying first-time buyers withdraw from an RRSP to buy or build a qualifying home, subject to repayment rules. The First Home Savings Account (FHSA) pairs tax-deductible contributions with tax-free withdrawals for a qualifying first home. Read how the RRSP Home Buyers' Plan works before you withdraw a dollar.
One-Time Closing Costs You Pay on Closing Day
Closing costs are the fees that turn a signed purchase agreement into a completed sale. They sit outside your down payment and usually cannot be folded into the mortgage, so you need cash on hand. Start by totalling them with our closing costs calculator.
| Cost | When it applies | Who collects it |
|---|---|---|
| Land transfer tax or registration fee | On closing | Provincial or municipal government |
| Legal fees and disbursements | On closing | Your real estate lawyer or notary |
| Title insurance | On closing | Insurer, arranged through your lawyer |
| Appraisal | Before approval | Your lender's appraiser |
| Home inspection | Before you waive conditions | Licensed inspector |
| Mortgage default insurance premium | On closing, if applicable | CMHC or a private insurer |
| Adjustments for property tax and utilities | On closing | Seller, settled through your lawyer |
Some provinces offer rebates for first-time buyers, and a few cities add a municipal land transfer tax on top of the provincial one. Because rules vary so widely, confirm current amounts with your provincial ministry of finance and your lawyer. Our walkthrough of closing costs when buying a house in Canada covers each line item in detail.
Mortgage Default Insurance and the Stress Test
Mortgage default insurance protects your lender, not you, if you default and the home sells for less than the mortgage balance. It is generally required on high-ratio mortgages, meaning those with a down payment below 20% from a federally regulated lender. The premium is a percentage of the loan amount, and it can be paid upfront or added to your mortgage. See mortgage default insurance in Canada, explained for how premiums are calculated.
Insurance is only one qualification hurdle. Under OSFI Guideline B-20, federally regulated lenders qualify you at the higher of your contract rate plus two percentage points or a published qualifying-rate floor. Confirm the current floor with OSFI or your lender, because it is reviewed over time. That single rule can shrink your maximum purchase price well below what the sticker rate suggests.
Your rate is not fixed in stone either. Variable-rate mortgages are tied to your lender's prime rate, which moves with the Bank of Canada policy rate. If you break a fixed-rate mortgage early, your penalty may be calculated using the interest rate differential (IRD), which can be substantial on a long term. Build those possibilities into your budget rather than assuming the cheapest exit.
Land Transfer Tax and Other Government Charges
Land transfer tax is a provincial tax most buyers pay when a property changes hands, calculated as a percentage of the purchase price on a tiered scale. Quebec and some other jurisdictions levy a similar welcome tax. Several provinces charge nothing on the first portion of the price, and many offer a rebate for qualifying first-time buyers. A handful of cities pile a municipal land transfer tax on top of the provincial one.
Because rates, tiers, and rebates differ by province and city, confirm the current schedule with your provincial ministry of finance, then use our land transfer tax guide by province to see how the math runs where you are buying.
Ongoing Costs of Owning a Home
The purchase is only the entry fee. Once you own the home, budget for:
- Mortgage payments — principal and interest, driven by your rate, term, and amortization.
- Property tax — billed by your municipality, often collected monthly through your lender.
- Home insurance — required by your lender for the life of the mortgage.
- Utilities — heat, electricity, water, and any internet or waste fees.
- Maintenance and repairs — a common rule of thumb is to set aside a percentage of the home's value each year, though the right amount depends on the property's age and condition.
- Condo or strata fees — if you buy a condo, plus any special assessment the board levies.
- Mortgage default insurance — if it was added to your balance, it is baked into your payments.
Our guide to the true cost of owning a home in Canada breaks down these recurring numbers.
How to Prepare Before You Buy
Start with a mortgage pre-approval so you know your realistic price range and can hold a rate while you shop. Then build a cash buffer for closing costs and the first few months of ownership, and keep an emergency fund separate so a furnace replacement does not become a credit card balance.
A practical order of operations:
- Get pre-approved and see how the stress test affects your maximum purchase price.
- Ask your lender for a written estimate of closing costs.
- Confirm your provincial land transfer tax and any first-time buyer rebate you qualify for.
- Add moving costs, utility hookups, and immediate repairs to the budget.
- Keep your down payment and closing funds somewhere stable and quick to access.
None of this is personalised financial advice. Your lender, lawyer, and a qualified tax professional can confirm the numbers that apply to your situation.
Frequently asked questions
What is the full cost of buying a home in Canada?
It comes in three layers. First, the down payment. Second, one-time closing costs such as land transfer tax, legal fees, title insurance, an appraisal, and a home inspection. Third, ongoing costs including mortgage payments, property tax, home insurance, utilities, maintenance, and any condo fees. Add moving costs and immediate repairs, then keep a cash buffer. Confirm current figures with your lender and your province.
How much should I budget for closing costs in Canada?
Closing costs vary by province, city, and purchase price, so no single percentage fits everyone. A common planning approach is to set aside an amount equal to a small percentage of the purchase price, then verify each item individually. Lenders can provide a written cost estimate at pre-approval, and provincial ministries publish current land transfer tax rates and rebates. Treat any estimate as a starting point.
Is CMHC mortgage default insurance always required?
No. Default insurance is generally required on high-ratio mortgages, which usually means a down payment below 20% from a federally regulated lender. Put down 20% or more and you typically avoid the premium. Insured mortgages are also subject to a maximum purchase price set by federal rules. Confirm current requirements and maximums with CMHC or your lender before finalising your down payment.
Can I use my RRSP or FHSA to cover the cost of buying a home in Canada?
Both can help qualifying first-time buyers. The RRSP Home Buyers' Plan lets you withdraw from an RRSP to buy or build a qualifying home, with repayment rules if you do not return the funds. The First Home Savings Account allows tax-deductible contributions and tax-free withdrawals for a qualifying first home. Check current limits and eligibility with the CRA or a tax professional before withdrawing.