money2Finally picked out THE one? Congratulations!

Buying your first condo can be an intimidating process. It’s important to do your homework so you know what to expect. One of the most unexpected factors for first time buyers is how many “closing costs” there are. While qualifying for a mortgage and coming up with a down payment is obviously the most critical focus of the purchasing process, there are a number of other upfront and ongoing costs that you don’t want to be prepared for.

1. Deposit and Down Payment

To secure the condo and to show the seller that you are serious about buying it, you will need to provide them with a deposit, submitted along with the signed offer documents. There is no fixed minimum of how much to put down, but if you are competing with other buyers, it helps to have a larger deposit, as high as 5% of the purchase price. The deposit should be in the form of a certified cheque, as it shows the seller that you have the funds available and are ready to complete the purchase! Your lawyer will help you make the arrangements for the deposit. Keep in mind that the deposit will count towards your down payment.

The down payment required can vary from as little as 5% to more than 20% of the purchase price. If your down payment is less than 20%, you will need to buy default insurance through your lender when you get your mortgage. The mortgage insurance you get protects the lender in case you cannot make your mortgage payments. For this reason, the mortgage insurance premiums can be high.

The down payment funds can come from your personal savings, TFSA or RRSP funds, a gift from family, or cash-back mortgage incentives offered by lenders.

2. Appraisal Fee

Your mortgage lender may require you to have an appraisal conducted in order to protect themselves from loaning you more than the condo is worth. For example, if you default on your mortgage, the lender would have to foreclose on the property and they would need to be able to sell it for what it is worth plus pay for the foreclosure costs. The appraisal fee is typically $250-$350, but many lenders will waive this fee in order to gain your business.

Since appraisals are done after a home has been purchased and when the mortgage is being arranged, it can become an issue if the appraisal comes in lower than the purchase price. In these cases, buyers need to fork up the difference, or in some cases the mortgage may not be approved. In very heated real estate markets, you may want to protect yourself from a lower appraisal by stating a condition on the offer that the appraisal must match the purchase price.

3. Lawyer’s Fee

Real estate lawyers help with the closing of your condo purchase. Lawyers fees range from $1,000 – 1,500, and this includes a number of services that prudent buyers won’t want to miss. This includes arranging the legal side of your deposit, down payment and mortgage, making sure your land transfer taxes are paid, reviewing your condo’s status certificate (the report which gives you the current status of your condo building and unit), and ensuring any property tax and utility information is transferred over properly. Most importantly, once all of the paper work is done, your lawyer will be responsible for handing the keys over to you on closing day!

(Don’t have a lawyer? Contact us at and we will put you in touch with a trusted lawyer from our professional network.)

4. Land Transfer Tax

Land transfer tax is paid by buyers when purchasing property. The tax rate varies by province, and is generally arranged to be paid through your lawyer. In some provinces, first-time buyers get a rebate on portions of the land transfer tax. Buyers in Toronto have an additional municipal land transfer tax, where first-time buyers also get a rebate. Check out our post for more information about the Ontario and Toronto land transfer tax.

5. Pre-paid Property Taxes and Utilities

Pre-paid property taxes and/or utilities can kick in before you even get the keys to your new condo. If the seller had already prepaid for property taxes or utilities beyond your closing date, there will be adjustments made in order to ensure the proper split between yourself and the seller. Don’t worry, your lawyer will be responsible for ensuring this is taken care of.

What’s next? “(There’s more?!) Find out in Part 2 coming tomorrow.