How Much Does It Cost to Buy a House in Canada?

Buying a house in Canada involves more than just the listed purchase price. Prospective homeowners must account for a range of financial obligations, from initial upfront payments to recurring expenses. Understanding these costs is important for comprehensive financial planning. The total financial commitment encompasses several distinct categories.

Initial Upfront Costs

A significant initial financial outlay when purchasing a home in Canada is the down payment. This payment represents the portion of the home’s purchase price a buyer pays directly, reducing the amount financed through a mortgage. The down payment size directly influences the mortgage principal and subsequent monthly payments.

Minimum down payment requirements vary based on the home’s purchase price. For properties valued at $500,000 or less, a minimum down payment of 5% is required. As the purchase price increases, so do the minimum requirements, with incremental percentages applied to higher value tiers. For instance, a home priced between $500,000 and $999,999 requires 5% on the first $500,000 and 10% on the portion exceeding $500,000.

If a buyer provides a down payment of less than 20% of the home’s purchase price, mortgage loan insurance becomes mandatory. This insurance, provided by entities such as Canada Mortgage and Housing Corporation (CMHC), Sagen, or Canada Guaranty, protects the lender in case of borrower default. The premium for this insurance is added to the mortgage amount, increasing the total borrowed sum.

Closing Day Expenses

Numerous costs are incurred when the property officially transfers ownership, known as closing day expenses. These payments are due in addition to the down payment and can significantly impact the total funds required to complete a home purchase. Buyers should anticipate these expenses in advance of the closing date.

Land Transfer Tax

One substantial closing cost is the land transfer tax, a provincial tax levied on property transfers. Its calculation is based on a tiered system related to the purchase price, meaning the tax amount increases with the home’s value. Some municipalities, such as Toronto, also impose their own municipal land transfer tax. For example, a $750,000 home in Ontario might incur over $11,000 in provincial land transfer tax, while some provinces charge a flat percentage of the purchase price.

Legal fees and disbursements

Legal fees and disbursements are necessary for completing the transaction. A real estate lawyer or notary handles tasks such as conducting title searches, preparing and registering documents, and ensuring compliance with legal requirements. Legal fees for these services range from $500 to $3,000, depending on the transaction’s complexity and the province. Disbursements cover out-of-pocket expenses incurred by the lawyer, including charges for title registrations and other administrative costs.

Appraisal fee

An appraisal fee is required by the mortgage lender to determine the market value of the property. This ensures the loan amount is consistent with the home’s value. Appraisal costs fall within a range of $300 to $500, though this can vary based on location and property complexity. The lender arranges for the appraisal, with the buyer covering the fee.

Home inspection

A home inspection, while not always mandatory, is recommended to assess the property’s condition and identify potential issues before finalizing the purchase. The cost for a professional home inspection ranges from $300 to $600, influenced by factors such as the home’s size, age, and location. This investment can provide insights and potentially save buyers from unexpected repair costs later.

Title insurance

Title insurance protects against financial loss due to defects in the property’s title, such as unknown liens, errors in public records, or title fraud. Although not legally required in all cases, mortgage lenders mandate it as a condition for approving a loan. This is a one-time fee, ranging from $200 to $500, and provides coverage for as long as the buyer owns the property.

Property survey

A property survey may be necessary if an up-to-date survey is not available or if the lender requires one. This document defines the property boundaries and outlines any easements or encroachments. The cost of a property survey can vary widely, ranging from $400 to $1,800, but can exceed $6,000 for larger or more complex properties.

Adjustments

Adjustments account for prorated expenses the seller may have paid in advance, such as property taxes, utilities, or condominium fees. On closing day, the buyer reimburses the seller for the portion of these prepaid costs covering the period after the buyer takes possession. The exact amount depends on the timing of the closing and the specific prepaid items.

GST/HST

For newly constructed homes, the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) is applied to the purchase price. The federal GST rate is 5%, while HST, which includes a provincial portion, varies by province. Buyers of new homes may be eligible for a GST/HST new housing rebate, which can recover a portion of the tax paid. For example, a federal rebate of up to $6,300 is available for homes under $350,000, with partial rebates for homes up to $450,000. Some provinces, like Ontario, also offer additional provincial rebates, potentially up to $24,000.

Mortgage broker fees

Mortgage broker fees are paid by the lender, not the borrower, as brokers are compensated for bringing business to financial institutions. Buyers should confirm the fee structure with their broker to avoid any unexpected charges.

Ongoing Homeownership Costs

Once the purchase is complete, homeowners face recurring expenses for maintaining the property and covering operational costs. These ongoing financial commitments contribute significantly to the true cost of homeownership. Budgeting for these regular payments is as important as planning for the initial purchase.

Property taxes

Property taxes are municipal taxes assessed on real estate, based on the property’s assessed value. These taxes fund local services such as education, public safety, and infrastructure. Property tax rates range from 0.5% to 2.5% of the assessed value, varying by municipality and province. Payments are made periodically, which can be monthly, quarterly, or annually, depending on local regulations.

Home insurance

Home insurance is a necessary expense for most homeowners, particularly if there is a mortgage on the property. It protects against financial losses due to perils such as fire, theft, and natural disasters. The cost of home insurance varies based on factors including coverage level, property location, age, and type of construction. Average annual premiums in Canada range from $1,000 to $2,000.

Utility costs

Utility costs are recurring expenses for essential services like electricity, heating (natural gas, oil, or electric), water, and internet. These costs fluctuate based on usage, the home’s size and energy efficiency, and local rates. Waste management services may also be included, either as part of property taxes or as a separate utility bill.

Maintenance and repairs

Budgeting for maintenance and repairs is a continuous responsibility for homeowners. This includes routine upkeep, such as lawn care and snow removal, as well as unexpected repairs like a leaky roof or a malfunctioning furnace. A common guideline suggests setting aside 1% of the home’s purchase price annually for maintenance. For older homes, some experts recommend allocating 3% to 5% of the home’s value each year to cover potential costs.

Mortgage payments

Mortgage payments represent the largest ongoing expense for most homeowners, covering both the principal amount borrowed and the interest charged on the loan. These payments are made monthly or bi-weekly over the mortgage term. The amount of each payment is influenced by the mortgage principal, interest rate, and amortization period.

Condo/Strata fees

For those living in condominiums or strata properties, monthly condo or strata fees are an additional recurring cost. These fees cover the maintenance, repair, and insurance of common areas and shared amenities within the building or complex. Depending on the building, these fees may also include some utilities.