What to Know About Mortgage Closing Costs in Canada

The down payment is not the last large amount of cash you may need when buying a home. Legal work, taxes, property adjustments and other expenses can become payable as the purchase moves toward completion. Mortgage closing costs in Canada are the upfront expenses associated with completing a home purchase, separate from the purchase price and down payment. Buyers should generally be prepared for closing costs of about 1.5% to 4% of the home’s purchase price, although the actual amount depends on the property and province or territory.

How Much Should You Budget for Closing Costs?

A useful starting point is 1.5% to 4% of the purchase price. That range can include expenses such as legal fees, property tax adjustments, title insurance and other costs associated with completing the transaction. Canada’s home-buying guidance uses the same range when describing the upfront costs buyers should prepare for.

On a $500,000 home, 1.5% to 4% works out to roughly $7,500 to $20,000. This is a budgeting range rather than a fee automatically charged to every buyer. Your actual total can fall at a different point depending on which expenses apply to the purchase.

Keeping this money separate from your down payment is important. A mortgage preapproval does not eliminate the need for cash to complete the transaction, and buyers considering whether they can roll closing costs into a mortgage should not assume every expense can simply be added to the loan.

Legal Fees and Disbursements

A lawyer or notary handles legal work required to transfer the property and complete the mortgage transaction. The bill can include both the professional fee and disbursements, which are expenses paid while completing the work.

Depending on the transaction, disbursements can include land-title searches, registration expenses and other administrative charges. The exact legal bill therefore depends on the property, jurisdiction and work required rather than a single Canada-wide fee.

Legal work is also central to what happens on mortgage closing day because the transaction must be completed and the funds transferred before ownership can change hands.

Land Transfer and Property Transfer Taxes

A property purchase may trigger a land transfer tax, property transfer tax or similar provincial or municipal charge. There is no single Canada-wide amount because the rules depend on where the property is located.

This can be one of the larger closing expenses, so a national percentage estimate should not replace a calculation for the specific province, municipality and purchase price. Some jurisdictions also provide rebates or relief for eligible buyers.

The location of the property matters here more than the location of the lender. Buyers should calculate the applicable transfer tax before making an offer rather than waiting until closing to discover how much cash will be required.

Property Tax and Other Adjustments

Closing also involves settling certain expenses that the seller has already paid, or amounts that need to be divided between buyer and seller.

Property taxes are a common example. If the seller prepaid property taxes covering a period after you take ownership, you may need to reimburse the seller for your portion. These adjustments are generally reflected in the transaction’s statement of adjustments.

This is different from paying a fee for a new service. You are effectively settling your share of an expense attached to the property based on the closing date.

Title Insurance

Title insurance may also form part of your closing costs. It can provide protection against specified title-related risks, subject to the policy’s terms and exclusions.

Whether it is required and how much it costs depends on the transaction and insurer. It should therefore be treated as a potential closing expense rather than assigned one universal amount. Title insurance is among the examples of upfront home-buying costs identified in federal guidance on budgeting beyond the mortgage itself.

Home Inspection and Appraisal Costs

A home inspection may be completed before closing to help identify issues with the property’s condition. Although it occurs earlier in the buying process, it belongs in the broader cash budget required to complete a purchase.

An appraisal is different. A lender may require one to assess the property’s value before advancing the mortgage. Federally regulated lenders must disclose applicable borrowing costs, which can include charges for an appraisal or inspection. Mortgage disclosure rules require specified mortgage costs and charges to be provided to borrowers.

Neither expense should be assumed to apply at the same price, or at all, to every transaction.

Mortgage Loan Insurance Can Create an Additional Cash Cost

A down payment below 20% generally requires mortgage loan insurance. The insurance premium itself can usually be paid upfront or added to the mortgage, so it does not necessarily have to be paid entirely in cash at closing.

There is an important provincial exception involving tax on the premium. Ontario, Manitoba and Quebec apply provincial sales tax to mortgage loan insurance premiums, and that tax cannot be added to the mortgage. It must be paid when you get the mortgage. The federal rules for mortgage loan insurance costs explain this distinction.

This issue is particularly relevant with a closed high-ratio mortgage because the smaller down payment generally brings mortgage loan insurance into the transaction.

Closing Costs Are Not the Same as Your Down Payment

The down payment reduces the portion of the purchase price that needs to be financed. Closing costs pay for taxes, professional services, adjustments and other expenses associated with completing the purchase.

For example, having exactly enough cash for a 10% down payment does not mean you necessarily have enough money to close. You still need funds for the closing expenses that apply to the transaction.

This distinction can matter during mortgage approval as well. CMHC’s insured-mortgage requirements specifically tell buyers to consider closing costs such as legal and land transfer fees and use the 1.5% to 4% range when estimating them.

Know the Final Amount Before Closing Day

The 1.5% to 4% guideline is useful early in the buying process, but it should eventually be replaced with actual figures. Once the property, purchase price and closing date are known, your lawyer or notary and mortgage professional can identify the expenses relevant to the transaction.

Keep enough accessible cash to cover those amounts rather than treating your entire available savings as the down payment. Closing costs can vary enough that relying on a rough percentage until the final day creates unnecessary risk.

That preparation becomes especially important because a mortgage preapproval is not a guarantee that the final transaction will close. Financing and property-related issues can still arise later, and understanding what can happen when a mortgage falls through on closing day helps separate closing-cost planning from the separate risk of the financing itself failing.

Questions About Mortgage Closing Costs in Canada

Are closing costs included in the down payment?

They are separate. Your down payment goes toward the home’s purchase price, while closing costs cover applicable expenses associated with completing the purchase.

Do closing costs have to be paid on closing day?

Not every expense is necessarily paid on the exact closing date. Some costs, such as a home inspection, may arise earlier. The broader closing-cost budget includes expenses incurred as you complete the purchase.

Are mortgage closing costs the same everywhere in Canada?

They can differ significantly. Provincial and municipal taxes, legal practices and transaction-specific expenses mean two homes with the same purchase price in different locations can have different closing costs.

Should you budget exactly 1.5% of the purchase price?

The 1.5% figure is the bottom of the general 1.5% to 4% budgeting range, not a guarantee of what your transaction will cost. Use the range for early planning, then replace it with estimates based on the specific property and jurisdiction.