The Hidden Costs of Buying a Home

Learn about the out-of-pocket expenses that come with buying a home in Canada.

By Emily Southey | 8 minute read

Jul 7

Buying a home is likely the biggest purchase you’ll make in your life. As such, it’s important to be aware of all the costs associated with doing so. To prepare yourself for the financial realities of homeownership, it’s vital to have a clear picture of all fees associated with buying a house in Canada. From the home inspection and appraisal fees to the legal fees and sales tax, buyers, especially first-time buyers, should make sure they aren’t blindsided by out-of-pocket expenses such as these. To learn more about the hidden costs of buying a home in Canada, keep reading. 

Hidden Housing Costs First-Time Buyers Should Be Aware of

There are lots of fees associated with buying a house in Canada, beyond the initial deposit or mortgage repayments. Canadian buyers should allocate part of their budget to paying for some of the “hidden” costs of buying a home. We’re talking about home inspection fees, legal fees, new home warranties, mortgage insurance, land transfer tax, home insurance, moving costs, and more. Some of these costs will need to be paid upfront, such as the home inspection fee, while others may arise in the future, such as renovations or repairs. To properly budget for the out-of-pocket expenses that come with buying a home in Ontario, check out the exhaustive list below.  

Fees Associated With Buying a House in Canada

Down Payment

The first and most obvious fee associated with buying a house in Canada is the down payment. In Canada, the down payment must be a minimum of 5% of the purchase price if the price is $500,000 or less. For homes between $500,000 and $1,000,000, a 10% down payment is required. Finally, for homes priced over $1,000,000, as many are in popular metropolitan areas such as the Greater Toronto Area (GTA), you will need to put down 20%. These rules apply nationwide and are applicable to all types of homes, whether you’re buying a condo, townhouse, or detached home. Before you start house hunting, we suggest making sure that you have enough money in savings to pay this significant fee.

Home Insurance

Home insurance is not mandatory in Canada, however, most banks and mortgage lenders require buyers to show proof of home insurance before being granted a mortgage. Home insurance protects your home against the cost of damages, such as fire, flood, theft, storm, or water damage. The cost of home insurance varies depending on your personal circumstances, the size and features of your home, the location of your home, and how much coverage you wish to include in your policy. Many insurance companies and brokers in Canada provide free home insurance quotes to homeowners.

“There are lots of fees associated with buying a house in Canada, beyond the initial deposit or mortgage repayments. Canadian buyers should allocate part of their budget to paying for some of the “hidden” costs of buying a home.”


The deposit is not to be confused with the down payment. When you put in an offer to buy a home and that offer is accepted, the buyer is often expected to make a deposit within 24 hours. The typical deposit is 5% of the purchase price. When the sale is finalized, the deposit is credited in full and put toward the cost of the home. During this interim period, the deposit is often held by a third party, such as the buyer’s real estate agent’s brokerage, until the completion date when it then becomes part of the down payment. The deposit is a small show of good faith from the buyer to the seller; the down payment is the total amount of funds the buyer is required to pay toward purchasing the property. 

Property Transfer Tax/Land Transfer Tax

The Property Transfer Tax (PTT) or Land Transfer Tax (LTT) is a tax that must be paid to the province or territory in which you reside. All provinces and territories except Alberta, Saskatchewan, Nunavut, and Yukon have this tax, though the rates differ depending on the location. Certain municipalities, such as Toronto, have an additional municipal land transfer tax. For example, Ontario uses a multi-tiered system to calculate LTT. On a $500,000 home in Ontario (located outside the municipality of Toronto), 0.5% is paid on the first $55,000, 1% on the next $195,000, 1.5% on the next 150,000, and 2% on the final $100,000. This equals an LTT of $6,475. 

Sales Tax

Buyers are required to pay sales tax when they purchase a home in Canada. The amount of sales tax and which kind depends on the province or territory. For example, in Ontario homeowners must pay the applicable 13% in harmonized sales tax (HST). By contrast, Quebec homeowners must pay both the goods and services tax (GST) and the provincial sales tax (PST). 

Home Inspection

Hiring a professional to conduct a home inspection is a wise decision. After all, the cost of the inspection could be minor compared to the cost of the necessary repairs that the inspector uncovers. For this reason, many Canadian buyers will make their offer contingent on a home inspection. While home inspections are not mandatory, they do have many benefits. However, they are paid for by the buyer not the seller, so the cost of the home inspection is yet another expense to prepare for.

Legal Fees

During the home-buying process, you will need to hire a property lawyer to review all legal documents, such as the agreement of purchase and mortgage. Legal expenses typically also include ordering a title search and registering a title. The cost of working with a lawyer can be hefty depending on which part of the country you live in, so it’s important to budget for it.

Moving Costs

Moving can be expensive, though costs vary widely. You could save on moving costs considerably If you decide to spearhead the move yourself by renting a truck and packing your own boxes. However, if you hire a professional moving company and/or are moving from another province or country, it will cost more. 

Interest Adjustment

Buyers are responsible for the cost of interest accrued between your first mortgage payment and your closing date. The percentage of interest you’ll be charged varies based on the payment frequency and the closing date. 

New Home Warranties

If you bought a brand new property, then you may be required to purchase a warranty depending on the Canadian province or territory you live in. Currently, new home warranties are mandatory in British Columbia, Ontario, and Quebec. Warranties typically cover structural abnormalities, building defects, and material defects, and range in price from a few hundred dollars up to $2,000. 

Mortgage Default Insurance

Mortgage default insurance is another hidden expense that you are responsible for paying if you make a down payment of less than 20%. This type of insurance is required for all down payments below 20% and is issued by the Canada Mortgage and Housing Corporation (CMHC), Genworth Canada, or Canada Guaranty. It is commonly referred to as CMHC insurance. The premium you pay varies depending on how large your down payment was.

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Land Survey

A land or property survey is a survey of the land your home sits on. A surveyor will examine the measurements of the plot and the positions of the structures. Mortgage lenders may require a land survey that clearly denotes the property’s boundaries. The buyer is responsible for paying the cost of the land survey, which varies in price depending on the size of the property, how much work and research is involved, and the time of year (land surveys tend to be more expensive in the winter).

Appraisal Fee

When you buy a new home or refinance your current mortgage, you’ll need to hire an appraiser to confirm the market value of the house. An appraisal fee is an amount your mortgage lender or bank will loan you, based on the appraised market value of your home. The cost of an appraisal varies based on the location and type of property you plan to buy. Some lenders may wave this fee to secure a mortgage with you, but they could still charge a financing fee.

The Importance of Budgeting for Out-of-Pocket Expenses

As you can see, purchasing a home doesn’t come cheap, which is why it’s so important to budget for a wide range of hidden expenses. Even if all the out-of-pocket expenses listed above don’t apply to you, there will likely be a few others that do. To ensure you understand the financial realities of buying a home, consult with a mortgage lender or real estate agent. Further, we always recommend shopping around to ensure you receive the best rates on the above expenses. Obtain and compare estimates from multiple mortgage lenders, appraisers, land surveyors, lawyers, home inspectors, and insurance providers. Lastly, to save money on these out-of-pocket expenses, do some research into any government programs, incentives, or rebates you may be eligible for.  

Frequently Asked Questions

What are the costs involved with buying a house in Canada?

There are many costs involved with buying a house in Canada. There is the initial down payment and deposit, subsequent mortgage payments, as well as several other out-of-pocket or hidden expenses like the home inspection fee, legal fees, sales tax, and property tax. 

What hidden costs are associated with homeownership?

Hidden costs associated with homeownership vary but may include home insurance, deposit, mortgage default insurance, appraisal fee, interest adjustment, legal fees, new home warranties, sales tax, home inspection, property tax, the land survey, and mortgage life insurance. Homebuyers in Canada should also budget for any applicable moving costs, renovation or repair costs, maintenance costs, utility hookup fees, and the cost of buying new furniture or appliances for your home. 

Are there closing costs in Canada?

Yes, there are closing costs in Canada, which are the legal and administrative fees homebuyers are required to pay when their house closes. Closing costs in Canada vary, which means buyers should budget between 1.5% and 4% of the purchase price. These costs are in addition to any down payment or mortgage payments you may have already paid. To estimate the closing costs on your property, you will need to know the purchase price of your home, the down payment percentage, the location of your home, and the type of property it’s classified as.

Emily Southey

Wahi Writer

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