Financing
We want to be upfront with you about where your money is going, so this section is all about the true costs of closing on your home. Knowing potential costs ahead of time will help us create a more realistic budget.
Home Inspection
If the sellers do not provide a home inspection we will always suggest having one completed so that we have conducted the necessary due diligence and are not misinformed when putting an offer in. This typically costs around $500 per inspection.
Deposit
These funds will be added to the remainder of your down payment, on closing. You will be arranging a mortgage for the difference between the purchase price and these funds.
Most of the time a 5% deposit is expected to accompany any offer. You may need access to those funds at a moment’s notice, and in a bank draft/certified cheque form.
Be sure that you make efforts to move any money that you’ve earmarked for deposit into an account that is easily accessible. This means working to move money held in a virtual bank (e.g. PC or Tangerine) into a conventional lender for easy access when needed.
Many virtual banks and most investments take 3-10 days to release the funds, so you will want to work to make these funds liquid sooner rather than later. Talk to us about timing for your specific timeline.
Closing Costs
When it comes to closing on a home, there are many small/big things that need to be taken into account. As it relates to costs associated with closing, here are a few to keep in mind.
Land Transfer Tax
This is a tax paid to both the City of Toronto and to the province every time a piece of real estate changes hands. Use the LTT calculator to help with budgeting to gauge what you will owe, above and beyond, the rebates you may qualify for.
Legal Fees
There are two parts to this:
The fees your lawyer will charge to help close the transaction range from $1,500-$3,500 (plus disbursements) depending on the value of the home. They will arrange all the transfers, payments, and other factors of the funds for the transaction.
“The Statement of Adjustments” document that typically the seller’s lawyer will put together to highlight and balance all the funds needed between the buyer and seller. If the sellers have paid in advance for any utilities or taxes, you will pay them back through the statement of adjustments as it relates to the closing date.
Canada Home and Mortgage Corporation (CMHC) Mortgage Loan Insurance
If you are putting down less than 20% you will need to pay a CMHC premium also known as mortgage default insurance. The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums. The insurance is added to your mortgage and paid off over the life of your loan. Click here to use a handy calculator. There is a cost associated with this premium that will need to be paid upon closing. Ontario charges a Provincial Sales Tax of 8% on the CMHC Insurance Premium. Click here for more information.
Bridge
It’s important to note that if you are selling a property and buying your new home, you may require bridge financing. This applies in situations where the closing date for the home you’re purchasing is before the closing date of the home you’re selling, leaving you without a down payment for the new home because it’s tied up in equity in your current home. Bridge financing is the tool used to help borrowers who find themselves in this scenario.
Like any loan, a bridge loan is subject to interest which is often at a rate similar to an open mortgage or a personal line of credit. While the interest rate on your bridge loan is higher than your mortgage rate (usually Prime + 2.00% or Prime + 3.00%) it will only be charged for a short period of time, before the equity from your previous home will be available to repay the loan. On top of the small amount of interest you’ll be charged, your lender will likely also charge a flat administration fee which is typically between $200-500.
Down Payment
This is typically the biggest one because it is the remaining funds that will accompany your deposit on closing. What is left over to cover the cost of owning your home is the mortgage.
Mortgages
Your mortgage is made up of the difference between the purchase price minus the total of your deposit and down payment. Your deposit is needed on offer night, and the rest of your down payment is needed at closing.
Important:
The funds you have available for the down payment will be discussed during your mortgage pre-approval process with your lender/mortgage broker if that hasn't happened already.
Rate Hold Duration – A specific mortgage rate will be locked in for a certain number of days. This protects you from market fluctuations and is generally between 60 and 120 days.
As soon as you buy…
Your lender will need to get up-to-speed on the sale. Most lenders do so much at the pre-approval stage that they are ready to gather the lender approval as soon as they have a copy of the Agreement of Purchase, along with the MLS listing, and a copy of the deposit. The day after an accepted offer we will take care of getting those documents to them! Then, they will get moving on final approvals.
If an appraisal is required, your lender will speak directly to the listing agent and book a time to visit the property. Once your lender has the bank approval you will then get a package of compliance documents from them.
Compliance Documents Package:
Checklist of next steps and any remaining documents needed from you
Standard consent forms related to your credit profile and personal information are being reviewed with the bank
Lender Commitment - Outlines your mortgage payments, interest rate, and repayment terms of your loan. This will also outline in detail what documents your lender requires from you to satisfy the bank conditions.
Cost of Borrowing Disclosure - Outlines again the terms of your loan and any costs associated with arranging the mortgage
Mortgage Insurance Options: A life and disability insurance package to ensure your mortgage is covered in the event of injury or death. We suggest you chat with your financial advisor to see if there is a more well-rounded product for you.
Amortization Schedule: A scheduled breakdown of your mortgage payments + as well as principal and interest to be paid over the term of your mortgage.
Movers
This can cost between $90-$120 an hour. Most moves 150km or less are considered local, but it will depend on the moving company you choose! The moving companies we recommend that our clients reach out to are listed below. Click on each of the companies listed below to view their websites and services!
Professional Packers
This can be advantageous when there is a tight moving schedule. Professional packers are efficient, and the time saved can allow you to focus on other things, but on the other hand, not everyone likes strangers touching their things and the cost depends on the size of your home.
We recommend Sparkly Solutions, who will do an in-person walk-through to see what they are dealing with and then put together a quote. They bill by the hour and a team of two is $100/hr typically working a 6-hour day, plus materials.
They offer decluttering, organizing, packing, and moving coordination services which may also include unpacking and setup. They work with Bumblebee Moving & Storage as their movers but are also willing to accommodate your preference if you prefer a specific company. Read more about what they offer by visiting their website! Additionally, if this is something you decide to move forward with let us know and we can help you set things up!
Insurance
You will need to speak with your insurer to determine the rate for your new place. We will provide you with answers to common questions about your home that they will have that you can bring to your meeting with them.
Closing Cost Rebates
If you are a first-time homebuyer be sure to read this section. It contains all of the information regarding the first-time home buyer rebate on the land transfer tax you pay at closing!
First-Time Home Buyer Rebates
If you are a first-time homebuyer, you can save money and use your RRSPs to help with the costs of buying real estate.
These are the five ways our government gives first-time buyers a break when buying real estate:
First-Time Home Buyers’ Tax Credit (HBTC) = $750 tax rebate
Home Buyers’ Plan (HBP) = Up to $35,000 per person (or $70,000 for couples) can be borrowed from your RRSP tax-free for a down payment.
Toronto Land Transfer Tax Rebate = Up to $4,475 in savings for Toronto residents.
Ontario Land Transfer Tax Rebate = Up to $4,000 in savings for Ontario residents.
First Home Savings Account (FHSA) = Up to $8,000 per year in tax-deductible contributions, with a lifetime limit of $40,000, and tax-free withdrawals for first-time homebuyers.
Toronto Land Transfer Tax Rebate
First-time homebuyers in Toronto can qualify for a rebate of up to $4,475 on their municipal land transfer tax (MLTT). Whether you're buying a townhouse, house, or condo, this rebate helps reduce closing costs.
To qualify for the Toronto Municipal Land Transfer Tax Rebate, you must:
Be a Canadian citizen or permanent resident
Be at least 18 years old
Move into the home within 9 months of purchasing it
Not have owned a home before
If you have a spouse, they cannot have owned a home while being your spouse
The rebate covers the full MLTT on homes priced up to $400,000. If the purchase price is higher (which, let’s be real, is most Toronto homes), you’ll still get the maximum $4,475 rebate, but you’ll owe the remainder of the tax. If you’re buying with a spouse and only one of you qualifies, you can still claim 50% of the rebate.
Your real estate lawyer will apply for this rebate electronically through Teraview when they register your transfer/deed.
Bonus - Ontario Offers a Land Transfer Tax Rebate Too
On top of the Toronto rebate, first-time homebuyers can also qualify for the Ontario Land Transfer Tax Rebate, which offers up to $4,000 in savings.
To qualify for the Ontario Land Transfer Tax Refund, you must meet the same eligibility criteria as the Toronto rebate. This rebate covers the full Ontario land transfer tax on homes priced up to $368,333. If the home costs more, you’ll still get the maximum $4,000, but you’ll owe the remaining tax. If you’re buying with a spouse and only one of you qualifies, you can still claim 50% of the rebate.
Unlike the Toronto rebate, this one must be claimed within 18 months of the property transfer—your real estate lawyer will help you file the paperwork.
Between the Toronto and Ontario rebates, first-time buyers can save up to $8,475 on land transfer taxes—a huge help with closing costs!
Canadian Home Buyers’ Plan (HBP)
One great source of funding for your mortgage down payment is your Registered Retirement Savings Plan (RRSP). The Canadian government’s Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw up to $35,000 from their RRSPs tax-free to use toward a down payment. If you're purchasing with a spouse or partner who is also a first-time home buyer, you can each withdraw $35,000, for a combined total of $70,000.
Since the HBP is considered a loan, the withdrawn amount must be repaid within 15 years, starting in the second year after the withdrawal. Each year, you must repay at least 1/15th of the total amount to avoid tax penalties.
To withdraw funds from an RRSP under the Home Buyers' Plan, first-time buyers must fill out and submit Form T1036 ("Home Buyers' Plan (HBP) Request to Withdraw Funds from an RRSP").
First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) is a tax-free savings account designed to help first-time homebuyers reach their homeownership goals faster. You can contribute up to $8,000 per year, with a lifetime limit of $40,000—and the best part? Your contributions are tax-deductible, and any investment growth and withdrawals are completely tax-free when used to purchase a home. Unlike the Home Buyers’ Plan (HBP), there’s no repayment required, making it a flexible and stress-free way to save.
Using the FHSA and HBP Together
Withdraw up to $35,000 from your RRSP using the HBP (must be repaid over 15 years).
Withdraw up to $40,000 from your FHSA (no repayment required).
Since both accounts offer tax-free withdrawals, you can access up to $75,000 per person ($150,000 per couple) for a down payment.
The First-Time Home Buyers' Tax Credit (HBTC).
The First-Time Home Buyers' Tax Credit (HBTC) was introduced as part of Canada’s Economic Action Plan to help Canadians with the costs associated with purchasing their first home. This credit can assist in offsetting closing costs such as legal fees, inspections, and land transfer taxes.
At current taxation rates, the HBTC provides a rebate of up to $1,500 for eligible first-time buyers. Since this is a non-refundable tax credit, it can only be used to reduce your owed taxes but will not result in a cash refund if no tax is payable. If you are purchasing a home with a spouse, partner, or friend, the combined claim cannot exceed $1,500.
To claim the First-Time Home Buyers' Tax Credit, you must include it in your personal tax return for the year of purchase. The applicable line number may vary, so check the latest CRA tax return guidelines.
Legal Fees
There are two parts to this:
The fees your lawyer will charge to help close on the transaction ranging from $1,500-$3,500 (plus disbursements) depending on the value of the home.
“The Statement of Adjustments” document that your lawyer will put together to highlight and balance all the funds needed between the buyer and seller. If the sellers have paid in advance for any utilities or taxes, you will pay them back through the statement of adjustments as it relates to the closing date. We recommend budgeting a few $1,000 for this.
Canada Home and Mortgage Corporation (CMHC) Mortgage Loan Insurance
If you are putting down less than 20% on your home, you’ll need to pay a CMHC mortgage loan insurance premium. The premium is calculated as a percentage of the loan amount (not the house price), and the rate depends on the size of your down payment. The smaller your down payment, the higher the premium you will pay. To see exactly how much the premium will be for your situation click here to use a handy calculator.
Bridge
It’s important to note that if you are selling a property and buying your new home, you may require bridge financing. This applies in situations where the closing date for the home you’re purchasing is before the closing date of the home you’re selling, leaving you without a down payment for the new home because it’s tied up in equity in your current home. Bridge financing is the tool used to help borrowers who find themselves in this scenario.
Like any loan, a bridge loan is subject to interest – often at a rate similar to an open mortgage or a personal line of credit. While the interest rate on your bridge loan is higher than your mortgage rate (usually Prime + 2.00% or Prime + 3.00%) it will only be charged for a short period of time, before the equity from your previous home will be available to repay the loan. On top of the small amount of interest you’ll be charged, your lender will likely also charge a flat administration fee – typically between $200-500.
Downpayment
This is the biggest one, typically. This is the remaining funds that will accompany your deposit on closing. What’s leftover to cover the cost of owning your home is the mortgage.
Mortgages
Your mortgage is made up of the difference between the purchase price minus the total of your deposit and down payment. Your deposit is needed on offer night, the rest of your down payment is needed at closing.
Important:
The funds you have available for the down payment will be discussed during your mortgage pre-approval process with your lender/mortgage broker if that hasn't happened already.
Rate Hold Duration – A specific mortgage rate will be locked in for a certain number of days. This protects you from market fluctuations and is generally between 60 and 120 days.
As soon as you buy
Okay, picture yourselves buying your next great space to call home…it’s coming soon! So, what happens then? Your lender will need to get up-to-speed on the sale. Most lenders do so much at the pre-approval stage that they are ready to gather the lender approval as soon as they have a copy of the Agreement of Purchase, along with the MLS listing and copy of the deposit.
Don't worry, we've got your back! The day after we find you your next space, we will automatically send the Agreement of Purchase and Sale, along with the broker load MLS listing and copy of your deposit, to your lender. These three things are what they need to get moving on final approvals.
If an appraisal is required, your lender will speak directly to the listing agent and book a time to visit the property. Once your lender has the bank approval you will then get a package of compliance documents from them.
Compliance Documents Package
Checklist of next steps and any remaining documents needed from you
Standard consent forms related to your credit profile and personal information being reviewed with the bank
Lender Commitment - Outlines your mortgage payments, interest rate and repayment terms of your loan. This will also outline in detail what documents your lender requires from you to satisfy the bank conditions.
Cost of Borrowing Disclosure - Outlines again the terms of your loan and any costs associated with arranging the mortgage
Mortgage Insurance Options - A life and disability insurance package to ensure your mortgage is covered in the event of injury or death. We suggest you chat with your financial advisor to see if there is a more well-rounded product for you.
Amortization Schedule - A scheduled breakdown of your mortgage payments + as well as principal and interest to be paid over the term of your mortgage.
Closer to Your closing date
As you approach the closing of your new home, check in with your mortgage broker/lender to ensure that all conditions have been met on your mortgage approval. Once this step is complete, your mortgage broker/lender will connect with your lawyer and will send them a detailed documents package, referred to as your "mortgage instructions".
Within the mortgage instructions is a detailed list of the items that your lawyer will be completing in preparation for your closing date. Your lawyer will reach out to you at this stage in the process to let you know of the final funds that you will need for closing, as well as any necessary documents that you may need to have with you for your lawyer's signing appointment. Once you sign with your lawyer, they will then be working closely with your bank and with the sellers of your new home.
Once your lawyer receives the mortgage funds from the bank, as well as your final down payment funds- they will ensure 100% of the purchase price is transferred to the sellers. Once this step is complete... you can pick up your keys! Congratulations, you are a homeowner!