Mortgage Basics
Everything you need to know about how a Canadian mortgage works
A mortgage is a loan secured against real property. The lender holds a legal charge on the property until the loan is repaid in full. In Canada, mortgages are governed by federal rules (OSFI, CMHC) and provincial laws. Unlike the United States, Canadian mortgages are typically full-recourse — the borrower remains personally liable even if the property value falls below the loan amount.
How Payments Work
Canadian mortgage interest is compounded semi-annually (twice per year), as required by the Interest Act. Most other countries use monthly compounding. This means the effective rate displayed on your mortgage contract must be converted before calculating monthly payments:
Monthly effective rate = (1 + contract rate / 2)^(1/6) − 1
Example: 5.00% semi-annual compounding → 0.4124% per month effective rate (not 0.4167%)
This distinction is built into all calculations in this tool to ensure accuracy.
Mortgage vs Home Equity Line of Credit (HELOC)
A mortgage is a closed-term instalment loan with fixed or variable payments. A HELOC is a revolving credit facility secured by home equity — you can borrow, repay, and borrow again. Most Canadian lenders offer a readvanceable mortgage that combines both in one product (e.g. Scotiabank STEP, TD FlexLine).
Key Terms Defined
| Term | Definition |
|---|
| Amortization | Total years to pay off the mortgage (typically 25 years for insured; up to 30 for uninsured) |
| Term | Length of your current rate agreement (1–5 years most common). At maturity you renew or refinance. |
| Mortgage amount | Property value minus down payment. For refinances, it is the new loan amount. |
| LTV (Loan-to-Value) | Mortgage amount ÷ property value. Lenders use this to assess risk — lower LTV = less risk. |
| Principal | The outstanding loan balance. Each payment reduces principal and pays interest. |
| Open mortgage | Can be prepaid or broken at any time with no penalty. Usually higher rate. |
| Closed mortgage | Prepayment is limited. Breaking it early triggers a penalty (IRD or 3 months interest). |
Down Payment Rules
Federal minimum requirements and what they mean for your clients
The federal government sets minimum down payment rules that apply to all residential properties in Canada. These rules determine whether CMHC (default) insurance is required and which lenders will approve the application.
| Purchase Price | Minimum Down Payment | CMHC Required? |
|---|
| Up to $500,000 | 5% of purchase price | Yes |
| $500,001 – $999,999 | 5% on first $500K + 10% on remainder | Yes |
| $1,000,000 and above | 20% minimum | No (not eligible) |
| Investment / rental property | 20% minimum | No |
| Vacation / seasonal | 20% minimum (some lenders 5% insured) | Lender discretion |
Example: Buying a $750,000 home requires 5% × $500,000 = $25,000 + 10% × $250,000 = $25,000 = $50,000 minimum (6.67% effective)
Gifted Down Payments
A down payment can be fully or partially gifted by an immediate family member (parent, sibling, grandparent, spouse). The lender will require a gift letter stating no repayment is required. For purchases above $500,000, lenders want to see that the borrower has at least 5% of their own funds — however each lender has slightly different policies.
Minimum Own Funds (Common Lender Policy)
- Under $500K purchase: fully gifted is generally acceptable for most A-Lenders
- $500K–$999K: many lenders require 5% from own sources on the portion above $500K
- Above $500K total down payment: lender may require 5% of total to be verified own funds
Down Payment Sources
Acceptable sources include: savings accounts, TFSA/RRSP withdrawals (RRSP via Home Buyers' Plan), FHSA (First Home Savings Account), proceeds from the sale of another property, gifted funds (with letter), and investment accounts. Borrowed funds (personal loans, LOC) are generally not acceptable as down payment for insured mortgages.
The 90-day history rule: lenders typically require 90 days of bank statements showing the down payment funds were accumulated, or documentation for any large deposits.
CMHC Mortgage Default Insurance
When it's required, how much it costs, and how it works
Mortgage default insurance — commonly called CMHC insurance — is mandatory in Canada for any residential purchase where the down payment is less than 20% of the purchase price. It protects the lender (not the borrower) in the event of default. Despite this, the premium is paid by the borrower and is typically added to the mortgage balance.
The Three Insurers
| Insurer | Type | Backed by |
|---|
| CMHC | Federal Crown corporation | Government of Canada (explicit guarantee) |
| Sagen (formerly Genworth) | Private (OSFI-regulated) | Private capital + reinsurance |
| Canada Guaranty | Private (OSFI-regulated) | Ontario Teachers' Pension Plan |
Premium Tiers (% of Mortgage Amount)
| LTV Ratio | Down Payment | Premium |
|---|
| ≤ 65% | ≥ 35% | 0.60% |
| 65.01 – 75% | 25 – 35% | 1.70% |
| 75.01 – 80% | 20 – 25% | 2.40% |
| 80.01 – 85% | 15 – 20% | 2.80% |
| 85.01 – 90% | 10 – 15% | 3.10% |
| 90.01 – 95% | 5 – 10% | 4.00% |
Premium is added to the mortgage balance and repaid over the amortization period. Provincial sales tax (PST) may be payable on the premium — it cannot be added to the mortgage and must be paid in cash at closing (Ontario: 8% PST; Quebec: 9% QST).
CMHC Eligibility Rules
- Maximum purchase price: $999,999 (not available for $1M+)
- Maximum amortization: 25 years for insured mortgages
- Property must be owner-occupied (primary or secondary residence)
- Maximum 2 rental units for insured purchases
- Minimum credit score: 600 (CMHC policy) though lenders may require higher
- GDS ≤ 39%; TDS ≤ 44%
The Mortgage Stress Test (OSFI B-20)
Canada's federal mortgage qualification rule that has been in effect since 2018
The mortgage stress test was introduced by OSFI (Office of the Superintendent of Financial Institutions) through Guideline B-20. It requires all federally regulated lenders (chartered banks, federal credit unions) to qualify borrowers at a rate higher than the actual contract rate — to ensure they can still afford payments if rates rise.
Qualifying Rate = max(Contract Rate + 2.00%, 5.25%)
Use whichever is higher: your actual mortgage rate plus 2%, OR the floor rate of 5.25%. This was updated June 2021 — the floor was previously 4.79%.
Who is Subject to the Stress Test?
- All insured mortgages — down payment under 20% (has applied since 2016)
- Uninsured mortgages at federally regulated lenders — any bank or federal trust company (applies since January 2018)
- Renewals at a new lender — you must re-qualify at the stress test rate when switching lenders at renewal
Who is NOT Subject?
- Renewals with your existing lender (straight renewal — no change in terms)
- Mortgages at provincially regulated credit unions (subject to provincial rules which vary)
- Private lenders (no federal regulation — they set their own standards)
Practical Impact Example
| Contract Rate | Qualifying Rate Used |
|---|
| Rate = 4.99% | 4.99% | max(4.99% + 2%, 5.25%) = 6.99% |
| Rate = 3.00% | 3.00% | max(3.00% + 2%, 5.25%) = 5.25% |
| Rate = 6.50% | 6.50% | max(6.50% + 2%, 5.25%) = 8.50% |
At today's rates the stress test adds approximately 2 percentage points to the qualifying rate. This reduces maximum mortgage size by roughly 15–20% compared to qualifying at the contract rate.
GDS & TDS Debt Ratios
The two ratios lenders use to determine how much you can borrow
Lenders measure affordability using two ratios. Both are expressed as a percentage of gross (pre-tax) income. Higher income or lower debts improve both ratios.
GDS — Gross Debt Service Ratio
GDS measures housing costs only relative to income:
GDS = (Monthly P+I + Property Tax + Heating + 50% of Condo Fees) ÷ Gross Monthly Income
| Lender Type | GDS Limit |
|---|
| A-Lender (insured) | ≤ 39% |
| A-Lender (uninsured) | ≤ 39% (some 35% internally) |
| B-Lender | Typically 40–45% with compensating factors |
| Private Lender | Not formally applied — uses LTV/equity |
TDS — Total Debt Service Ratio
TDS adds all other monthly debt payments on top of housing costs:
TDS = (GDS numerator + Car Payments + Credit Card Minimums + Student Loan + Other Loan Payments) ÷ Gross Monthly Income
| Lender Type | TDS Limit |
|---|
| A-Lender (insured) | ≤ 44% |
| A-Lender (uninsured) | ≤ 44% (some 42% internally) |
| B-Lender | Typically 45–50% with letter of explanation |
| Private Lender | Not a primary criterion |
Tip: Paying off a $500/month car payment before applying adds roughly $60,000–$70,000 to the maximum qualifying mortgage at today's rates.
Income Used in the Calculation
Employment income (T4/paystub), rental income (50% add-back or offset method per OSFI), pension/CPP/OAS, investment income (2-year average), self-employment income (2-year average T1 line 15000). Commission income typically averaged over 2 years.
Credit Score Impact on Mortgages
How Equifax/TransUnion scores translate into lender tiers and rates
Canada uses the Equifax Beacon 9.0 and TransUnion CreditVision scoring models. Scores range from 300–900. Mortgage lenders pull a hard inquiry from one or both bureaus. Multiple mortgage inquiries within a 14–45 day window are treated as a single inquiry by the credit bureaus.
| Score Range | Tier | Impact |
|---|
| 760+ | Excellent | Best A-Lender rates, no overlays, max LTV |
| 720–759 | Very Good | Strong A-Lender, minor rate premium possible |
| 680–719 | Good | A-Lender approved, some lenders add 10–25 bp |
| 650–679 | Fair | Limited A-Lender options; B-Lender more common |
| 620–649 | Below Average | B-Lender territory; higher rates, larger fee |
| 580–619 | Poor | B-Lender or Private only; significant rate premium |
| Below 580 | Very Poor | Private lender only; equity-based underwriting |
What Hurts a Mortgage Application
- Collections/NSF: Any collection item is a major red flag — most A-Lenders decline
- Consumer proposal or bankruptcy: Typically requires 2 years post-discharge at A-Lender, immediately after at B or Private
- Missed payments: 30-day late within 2 years is scrutinized; 60+ day late is usually an automatic decline at A-Lender
- High utilization: Credit cards at 80%+ utilization reduce the score and raise lender flags
- Multiple new accounts: Too many inquiries/new accounts in 6–12 months signals risk
Credit score minimum for CMHC-insured mortgages is 600. Most A-Lenders apply a 680 minimum internally. Some monolines approve to 600 for insured products with compensating factors.
Employment & Income Types
How different income sources are treated by mortgage lenders
| Employment Type | Documentation Required | How Income is Calculated |
|---|
| Salaried (T4) | Letter of employment + recent paystub | Base salary × 12 months (or annualized hourly rate) |
| Hourly (T4) | Letter of employment + paystub | Hourly rate × guaranteed hours × 52 weeks |
| Commission | 2-year T1 Generals + T4s + paystub | 2-year average of line 10120 (commission income) |
| Self-Employed (Stated) | 6 months business bank statements OR BNBF/Sagen Advantage | Stated income with reasonableness test; higher rate/fee |
| Self-Employed (Verified) | 2-year T1 Generals + NOA + business financials | 2-year average of line 13500 net business income; add-back depreciation |
| Pension/CPP/OAS | Award letter or recent statement | Full gross amount (no averaging required) |
| Investment Income | 2-year T1 + investment statements | 2-year average; must be sustainable |
| Rental Income | Lease + T776 or CMHC rental worksheet | 50% add-back OR offset method (see Rental Income tab) |
Self-Employed: The Two Paths
Verified income (NOA-based): Lenders use 2-year average of net business income from T1 line 13500. Common add-backs include CCA (depreciation), entertainment, home office (portion). Best rates available.
Stated income (business-for-self / BFS): Available through Sagen Advantage and specific B-Lender programs. Typically requires 2 years self-employment history, 10–35% down payment, and charges a fee. The stated income must be reasonable for the profession and geographic area.
Many self-employed borrowers minimize income on their taxes to reduce tax burden — but this directly reduces their mortgage qualifying amount. Brokers should model the impact and discuss tax strategy well before a purchase.
A-Lender vs B-Lender vs Private
Understanding the three tiers of Canadian mortgage lending
| A-Lender | B-Lender | Private / MIC |
|---|
| Examples | Big 6 banks, monolines (First National, MCAP, RMG) | Home Trust, Equitable Bank, CMLS, Haventree | Individual investors, MICs, private funds |
| Credit (min) | 620–680+ | 500–600+ | No minimum (equity-based) |
| Stress test | Required (OSFI B-20) | Usually required but softer | Not applicable |
| Rates (typical) | Best market rates | +0.50 – 2.00% over A | +3 – 8% over A (or more) |
| Lender fee | None | 0.5 – 2% | 1 – 3% |
| Brokerage fee | None (finder's fee from lender) | 0.5 – 1% | 1 – 2% |
| Max LTV | 80% uninsured; 95% insured | 80–85% | 75–80% (varies) |
| Max amortization | 25 yr insured; 30 yr uninsured | 25–30 years | 1–3 year term; IO available |
| Use case | Standard, clean application | Credit issues, recent employment, high TDS | Bridge financing, equity takeout, credit rebuilding |
The Bridge Strategy
Private and B-Lender mortgages are typically short-term bridge tools (1–2 years), not long-term solutions. A well-documented exit strategy — e.g., "requalify at A-Lender after 12 months of T4 employment history" — is critical both for the client's plan and for regulatory compliance documentation.
Total cost of a 1-year private mortgage at 12% with 3% lender fee and 2% broker fee on a $400,000 loan: approximately $68,000–$80,000 in interest and fees. Always present the total cost of borrowing clearly to clients.
Private Mortgages & MICs
Equity-based lending when institutional lenders say no
A private mortgage is funded by an individual investor or a Mortgage Investment Corporation (MIC) — a pool of private capital that invests exclusively in mortgages. Unlike banks, private lenders are not federally regulated by OSFI and set their own underwriting standards.
How Private Lenders Underwrite
Private underwriting is primarily equity-based: the lender focuses on the property value, location, and LTV rather than the borrower's income or credit score. Two common approaches:
- Equity Only: Lend based purely on LTV (typically max 75%). Income and credit are secondary. Used for high-equity situations or where income is difficult to prove.
- Income Qualified: Standard underwriting but with more flexible income and credit overlays. Used where the applicant has some income but doesn't meet A/B lender thresholds.
Typical Private Mortgage Structure
| Feature | Typical Range |
|---|
| Rate | 9% – 15%+ |
| Term | 6 months – 2 years (usually 1 year) |
| Amortization | 25–30 years (for P+I) or interest-only |
| LTV (1st mortgage) | Max 75–80% |
| LTV (2nd mortgage) | Max 65–80% combined (CLTV) |
| Lender fee | 1 – 3% of mortgage amount |
| Brokerage fee | 1 – 2% of mortgage amount |
| Legal + appraisal | $2,500 – $4,000 typical |
Exit Strategy is Mandatory
FSRA (Ontario) and other provincial regulators require brokers to document a realistic exit strategy for any private mortgage — the plan to refinance to institutional lending within the private term. Common exit strategies:
- Establish 2-year self-employment history, then qualify as BFS at A/B-Lender
- Complete consumer proposal / discharge bankruptcy, then rebuild credit for 12–24 months
- Sell the property and repay from proceeds
- Debt consolidation reducing TDS below institutional thresholds
Regulatory reminder: Brokers must disclose all fees, provide a cost of borrowing disclosure, and document the exit strategy file. Failure to do so is a FSRA/BCFSA suitability violation.
Fixed vs Variable Rates
The most common question clients ask — and how to answer it clearly
Canadian mortgages are primarily available as fixed rate (rate locked for the term) or variable rate (rate moves with the lender's prime rate, which follows the Bank of Canada overnight rate).
| Fixed Rate | Variable Rate |
|---|
| Rate | Set at origination; does not change | Prime ± a spread (e.g. Prime − 0.75%) |
| Payment | Same every month | Fixed payment (principal allocation varies) OR adjustable payment |
| Prepayment penalty | Greater of IRD or 3 months interest (big banks) | 3 months interest only |
| Historically cheaper? | Not historically (variable won ~70% of 25-year periods) | Yes, over full amortization (pre-2022 data) |
| Risk | Opportunity cost if rates fall | Payment shock if rates rise sharply |
| Best for | Rate-sensitive budgets, risk-averse clients | Clients with payment buffer, shorter stays, flexible income |
The IRD Penalty (Interest Rate Differential)
Breaking a fixed mortgage early at a chartered bank can be extremely expensive. The IRD is calculated as the difference between your contracted rate and the current rate for the remaining term, applied to the outstanding balance. At times of sharply declining rates, this can reach $30,000–$50,000+.
Monoline lenders (First National, MCAP, RMG, etc.) generally calculate IRD using the posted bond yield, resulting in much lower penalties than Big 6 banks which use their posted rates (which carry an artificial spread). Always simulate the penalty before recommending a fixed rate at a bank.
SAC Compounding (Canadian Law)
All Canadian mortgage rates are quoted as semi-annual compounding (SAC) per the Interest Act. The actual monthly effective rate is: (1 + annual rate / 2)^(1/6) − 1. This tool applies SAC compounding to all calculations.
Amortization & Mortgage Terms
The difference between your term and your amortization — and why it matters
These two concepts confuse many first-time buyers:
- Amortization: Total time to pay off the mortgage (e.g. 25 years). Longer amortization = lower monthly payment but more total interest.
- Term: Length of your current rate agreement (e.g. 5 years). At the end of the term you renew, switch lenders, or pay off the balance.
Amortization Limits in Canada
| Scenario | Maximum Amortization |
|---|
| Insured mortgage (down payment < 20%) | 25 years |
| Uninsured (down payment ≥ 20%), new purchase — federally regulated lender | 30 years |
| Uninsured refinance — federally regulated lender | 30 years |
| First-time buyer or new construction insured (as of August 2024) | 30 years (Budget 2024 change) |
Impact of Amortization Length
| Amortization | Monthly Payment (at 5%, $500K mortgage) | Total Interest Paid |
|---|
| 20 years | $3,290 | ~$289,000 |
| 25 years | $2,908 | ~$372,000 |
| 30 years | $2,665 | ~$459,000 |
A 25-year amortization saves approximately $87,000 in interest versus 30 years — but costs $243/month more. Many clients benefit from taking the 30-year amortization and making accelerated payments for flexibility.
Prepayment Privileges & Penalties
Understanding how and when you can pay down your mortgage faster
Prepayment privileges allow you to pay more than your regular payment without a penalty. Most closed mortgages in Canada offer annual prepayment rights of 10–25% of the original mortgage balance per year, plus the ability to increase regular payments by 10–25%.
Typical Prepayment Options
| Option | Typical Range | Notes |
|---|
| Annual lump sum | 10–25% of original balance | Usually once per year; resets on mortgage anniversary |
| Payment increase | 10–25% per year | Can permanently increase regular payment |
| Double-up payments | Up to 100% of regular payment | Available with some lenders; excess goes to principal |
Breaking Your Mortgage Early
Penalties vary significantly by lender type:
- Variable rate: 3 months interest — always
- Fixed rate at monoline lender: Greater of 3 months interest OR IRD using bond yield — usually reasonable ($2,000–$8,000)
- Fixed rate at big bank: Greater of 3 months interest OR IRD using posted rates — can be $20,000–$50,000+
Clients who plan to sell within 1–3 years, or who anticipate a significant life change, should be advised to consider variable rate or monoline fixed to avoid punishing bank penalties.
Accelerated Payments
Accelerated bi-weekly payments = monthly payment ÷ 2, paid every 2 weeks (26 payments/year). This is equivalent to making one extra monthly payment per year and can shave 2–3 years off a 25-year amortization.
Rental Income Treatment
OSFI rules for how rental income is counted in mortgage qualification
When a borrower owns rental properties (non-subject properties) or is purchasing a multi-unit with a rental suite, lenders use one of two methods to account for rental income in the GDS/TDS calculation:
Method 1: 50% Add-Back (Most Common)
Add 50% of gross rental income to qualifying income.
Also add 100% of the rental property's PITIA (mortgage payment + tax + insurance + condo fee) to the TDS debts side.
Net effect: 50% of rent offsets the rental property debt obligations.
Used by most A-Lenders for owner-occupied purchases with accessory rental units or for borrowers with non-subject rental properties.
Method 2: Rental Offset
Calculate Net Rental Income = Gross Rent − all rental property carrying costs (P+I + tax + insurance + condo fees + 5% vacancy allowance).
If positive (surplus): add 80% to qualifying income.
If negative (shortfall): add the full shortfall to TDS debts.
Used by some B-Lenders and in specific CMHC/Sagen rental programs. Generally more favourable when rents significantly exceed carrying costs.
Which Method to Use?
Run both methods and present the one that results in the best GDS/TDS ratios. The Scenario Comparison tab in this tool does this automatically for non-subject rental properties. The Rental Worksheet tab provides detailed cap rate, DCR, GRM and cash-on-cash metrics for investment properties.
First-Time Home Buyer Programs
Federal and provincial incentives available to first-time buyers in Canada
1. First Home Savings Account (FHSA)
Introduced January 2023. Combines features of RRSP and TFSA for first-time buyers:
- Annual contribution limit: $8,000/year
- Lifetime contribution limit: $40,000
- Contributions are tax-deductible (like RRSP)
- Withdrawals for qualifying home purchase are tax-free (like TFSA)
- Unused room carries forward 1 year
- Account must be open at least 1 calendar year before withdrawal
2. Home Buyers' Plan (HBP)
Withdraw up to $60,000 from your RRSP tax-free for a first home purchase (increased to $60K in 2024 Budget from $35K). Must repay over 15 years starting the second year after withdrawal, or the annual repayment amount is included in taxable income.
A couple can withdraw up to $60,000 each ($120,000 combined) from their RRSPs under the HBP — a significant boost to the down payment.
3. First-Time Home Buyer's Tax Credit (HBTC)
A non-refundable federal tax credit of $10,000 on the purchase of a qualifying home. Tax credit value: 15% × $10,000 = $1,500 reduction in federal tax payable. Shared between spouses for a combined $1,500.
4. Land Transfer Tax Rebates (Provincial)
| Province | Rebate Available | Max Amount |
|---|
| Ontario | Yes — for resale homes, up to the first $368,333 of purchase price | $4,000 |
| City of Toronto (MLTT) | Yes — additional Toronto rebate | $4,475 |
| British Columbia | Yes — First-Time Home Buyers' Program | Full PTT exemption up to $500K |
| Prince Edward Island | Full LTT exemption | Full exemption |
| Other provinces | Varies — see LTT tab for details | — |
Land Transfer Tax
Provincial and municipal taxes payable on closing — often underestimated
Land Transfer Tax (LTT) — or Property Transfer Tax in BC — is charged when a property changes ownership. It is a one-time closing cost paid by the buyer. Alberta and Saskatchewan do not charge LTT; they charge smaller land title transfer fees instead.
Ontario LTT (Approximate at $800,000)
| Bracket | Rate | Tax on Bracket |
|---|
| First $55,000 | 0.5% | $275 |
| $55,001 – $250,000 | 1.0% | $1,950 |
| $250,001 – $400,000 | 1.5% | $2,250 |
| $400,001 – $2,000,000 | 2.0% | $8,000 (on first $800K) |
| Total Ontario LTT on $800K | | ~$12,475 |
Toronto properties pay a double LTT — municipal (MLTT) + provincial (Ontario LTT) — totalling approximately $24,950 on an $800,000 purchase for non-first-time buyers.
LTT is a significant closing cost that's often forgotten in budgeting. Always include it in the total cash-to-close calculation. Use the Provinces tab in this tool for exact figures by province.
Renewal vs Refinance
Two very different events at the end of a mortgage term
| Renewal | Refinance |
|---|
| What it is | Extending your existing mortgage for a new term at maturity | Breaking your current mortgage and getting a new one (usually larger) |
| Timing | At the end of your current term | Any time during your term (with penalty if closed) |
| Amount changes? | No — same balance, new rate and term | Yes — typically to access equity |
| Stress test required? | Only if switching lenders | Yes — full stress test at new lender |
| Penalty | None (at maturity) | IRD or 3 months interest if during term |
| Legal fees | Usually none (same lender) or minimal | $1,500 – $2,500 (discharge + new registration) |
Switch (Transfer) vs Refinance
A switch or transfer at maturity moves your existing balance to a new lender without changing the loan amount. It avoids penalty (at maturity) but may trigger a stress test. A refinance changes the loan amount — typically to access equity — and always requires full qualification.
When to Recommend Refinancing During the Term
- Rate has dropped significantly and long-term savings exceed the penalty + costs
- Client needs to access equity for renovation, debt consolidation, or investment
- Divorce or separation requiring a mortgage restructure
- The break-even period (penalty ÷ monthly savings) is less than the remaining term
Use the Renewal Calculator tab in this tool to model the break-even point and compare total interest under different scenarios.
Fees & Closing Costs
A complete checklist of costs clients should budget for on closing day
Many clients are caught off-guard by closing costs beyond the down payment. A rule of thumb is to budget 1.5% – 4% of the purchase price in closing costs, in addition to the down payment.
| Cost Item | Who Pays | Typical Amount | Notes |
|---|
| Land Transfer Tax | Buyer | 0.5 – 2.5%+ of price | Double in Toronto; none in AB/SK |
| Legal fees (lawyer) | Buyer | $1,200 – $2,500 | Varies by province and complexity |
| Title insurance | Buyer | $200 – $500 | Strongly recommended; protects against fraud and survey issues |
| Home inspection | Buyer | $400 – $700 | Highly recommended; may be waived in competitive markets |
| Appraisal fee | Buyer (usually) | $400 – $800 | Required for most insured and B-Lender mortgages |
| CMHC premium PST | Buyer (cash at closing) | 8% of premium (ON) | Cannot be added to mortgage; must be paid in cash |
| Property tax adjustment | Varies | Months-proportional | Depends on billing cycle and closing date |
| Moving costs | Buyer | $1,000 – $5,000+ | Often forgotten in budgets |
| Lender fee (B/Private) | Buyer | 0.5 – 3% | Charged by B-Lenders and private lenders; typically deducted from advance |
| Brokerage/broker fee | Buyer (B/Private) | 0.5 – 2% | May be deducted from proceeds or paid at closing |
Cash-to-Close Formula:
Down Payment + LTT + Legal fees + Appraisal + CMHC PST + Title insurance + Adjustments
For a $700,000 Ontario purchase with 10% down: approximately $70,000 (down) + $9,475 (LTT) + $1,800 (legal) + $500 (appraisal) + ~$1,200 (CMHC PST) = ~$83,000 total cash needed