Costs associated with the purchase of a property are not limited to the down payment and the mortgage. Here is a brief list of charges that will occur when taking possession of your home. You must plan for about 1.5% of the property purchase price to cover these charges.
- Insurance premium (Canada Mortgage and Housing Corporation (CMHC)/Genworth/Canada Guaranty)
If the down payment is less than 20% of the property purchase price, the borrower must pay this insurance charge. Below is a chart of the CMHC premiums as of May 7th, 2018. They may change without notice.
Mortgage insurance premium:
|Loan to value||Premium applicable to the total loan amount|
|80% or less||0.00%|
|85% or less||2.80%|
|90% or less||3.10%|
|95% or less||4.00%|
These charges can be added to the loan or paid separately when borrowing for a standard loan. A 9% provincial tax is applicable on the premium and cannot be added to the loan. It must be paid separately upon closing the transaction at the notary.
- Certificate of location
The lender will want to ensure that the property complies with all relevant regulations and that any addition was done within the property boundaries. Most of the lenders will require a recent certificate of location, especially since the cadastral reform. You can avoid the cost of a new certificate of location by subscribing a title insurance to protect your real estate investment in case of problems related to property title. There are two title insurance providers in Canada: FCT (First Canadian Title) https://www.fct.ca and FNF Canada http://www.fnf.ca. The cost of title insurance is approximately $200.
- Appraisal fee
To determine the market value of the property, lenders require an appraisal report done by a licensed appraiser. These costs are generally covered by the lender, but it may happen that the buyer has to pay an additional fee depending on the region and the type of residence.
- Notary fees
These fees are payable by the client. The duty of a notary is to protect the interests of the client. The notary will draw and register the act of sale and the deed of loan. Prices vary between $1000 and $1200 for a purchase, and between $850 and $1000 for a refinancing, including the discharge. If a discharge is not required, the cost will vary between $575 and $600. Some financial institutions will sometimes offer promotions with an allocation for the notary fees for refinancing.
- Welcome tax (Real estate transfer tax)
The welcome tax is calculated on the purchase price or the municipal value, the highest of the two.
It applies as follows:
0.50% on the first $50 000;
1% for the portion between $50 000 and $250 000$;
1.5% on the amount in excess of $250 000.
Generally, this tax invoice is mailed directly to the new property a few weeks following the closing of the transaction at the notary.Also, take note that for the city of Montreal, there is an additional step: 2% for $500,000 and up.
- Home insurance
It is impossible to obtain a mortgage loan without subscribing to home insurance to cover the cost of replacement in case of disaster. We suggest to go through an insurance broker to negotiate the premium. The cost varies depending on the property and the insurance company.
- Miscellaneous fees
- Adjustment for municipal and school taxes
- Mortgage interest adjustment
- GST/PST for a new construction
- Mortgage life insurance (optional)
- Fees to connect public services
- Moving fees
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