How To Buy Your First Home - Step 3: Calculate the Cost of Buying Your New Home

In case you missed the previous steps in my How To Buy Your First Home series: 

Step 1: Get Your Finances In Order 
Step 2: Get A Mortgage Pre-Approval

Read on, and if you have any questions, let’s grab a coffee (or iced tea if you’re like me and don’t drink coffee) and we can gab about the process of buying your first home. 

How To Buy Your First Home - Step 3: Calculate the Cost of Buying Your New Home  Karly Moore - Toronto Real Estate

Step 3: Calculate the Cost of Buying Your New Home

I know talking about finances and expenses can be depressing, but encountering unexpected costs in the process of purchasing your new home is a sure fire way of killing your home buyer’s high. So below I lay it all on the line and hope that this helps eliminate any unexpected (and potentially expensive) surprises for you.

**Please note: The costs outlined below will vary depending on the type of property you want to purchase, where it is located, and the purchase price. When I work with first time home buyers I give them this information in our first meeting together with estimates for each of the following costs which are tailored to the type of property they want to purchase. The costs below are estimates and these figures may not apply to your home purchase. For more detailed figures pertaining to your house hunt, I’d be happy to chat further with you.

Ok, let’s break down the numbers on what it actually costs to buy a home. The following costs are what you could expect to have to pay by the time you take possession of your new home, otherwise known as the “closing costs”. I am going to use a purchase price of $700,000 for this example.

Down payment

This is the biggest expense in the home buying process. To avoid paying mortgage insurance premiums, you would need to have 20% of the purchase price for your down payment. But this is often a pretty difficult task, especially for first time home buyers. The minimum down payment amount for any home purchase under $500,000 is 5%. The portion of the purchase price over the first $500,000 requires a 10% down payment. Any home purchased over $1,000,000 requires a 20% down payment minimum. So for our example of a $700,000 purchase price, the minimum down payment you would need is $45,000 (5% on the first $500,000 and then 10% on the additional $200,000). If you can save up $140,000 (20% of $700,000) for a down payment you can avoid paying mortgage insurance premiums. Your mortgage would then be the balance of the purchase price after your down payment. (Mortgage amount = purchase price – down payment). The down payment is paid through your lawyer on the date of closing. So if you purchase your house in May but don’t get possession until September, that’ s four more months you have to save towards your down payment.


The deposit is submitted to the seller with your offer, and your deposit funds must be paid in the form of a bank draft or certified cheque. The deposit cheque amount should be around 5% of the purchase price. Generally the larger the deposit the more motivated and committed the seller knows you are. For our example, let’s say you submit a deposit of $35,000 (5% of the purchase price). Please make sure you have your deposit funds ready and available to withdraw from your bank account at a moment’s notice. Important to note: the deposit amount is credited towards your down payment. If you are giving a 10% down payment of $70,000 and you have already submitted a deposit of $35,000, then on the closing date you will pay the $35,000 balance of your down payment. 

Mortgage insurance premiums

If your down payment is less than 20% of your purchase price, your mortgage lender will require you to pay a mortgage insurance premium as a way to protect them if you were to default on your mortgage. The technical name for a mortgage with a less than 20% down payment is a “high ratio mortgage.” The mortgage insurance premium is added to your mortgage, and paid off during the life of your mortgage. Click here to calculate your mortgage insurance premium.

Land Transfer Tax

If you are buying a home anywhere in Ontario you will be required to pay the Provincial Land Transfer Tax (LTT). If you are purchasing a home in Toronto, you are required to pay the Provincial Land Transfer Tax and the Toronto Land Transfer Tax. The amount of Land Transfer Tax you have to pay depends on the purchase price. For a home purchase of $700,000 outside of Toronto, the LTT would be $10,475. If you are buying a $700,000 home in Toronto you would pay the Provincial LTT of $10,475 in addition to the Toronto LTT of $9,725 for a total LTT payment of $20,200. The LTT balance is due by the day you are set to take ownership of the property. It cannot be added to your mortgage so you will definitely want to ensure you have saved these funds in advance. There is some good news for first time home buyers though!  First time home buyers can receive a rebate on their Provincial Land Transfer Tax payment to a maximum of $2,000 and a rebate on their Toronto Land Transfer Tax payment to a maximum of $3,725. Calculate the total Land Transfer Tax on your future home purchase here


Any time you are buying or selling real estate you will want to hire a lawyer to represent you and take care of all the nitty gritty legal details involved in you taking possession of your new home. A lawyer’s fees can range significantly, but I would suggest budgeting for $2,000 - $2,500 + HST to be safe. Your lawyer will also likely recommend that you get title insurance which will be an additional one time charge and is based on the purchase price of your home. Lawyer’s fees are subject to HST. If you do not currently have a lawyer you have worked with before, which many first time buyers don’t, I can refer you to a couple real estate lawyers that would all be great for you to work with.


Your mortgage lender may require an appraisal to be done on the property you want to purchase. Some lenders will pay the appraisal fee for you, but if they are going to make you pay for it I would suggest you budget for $350.

Real estate agent fees

In the large majority of home sales, it is the seller that pays the real estate commissions to the two real estate agents involved (the buyer’s agent and the seller’s agent). However, in the off chance that the seller of the home you want to buy is unwilling to pay any real estate commissions it would be your responsibility to pay your real estate agent's commission. We can talk about this in more detail when you decide to start house hunting.


When purchasing a re-sale home, the home purchase price is not subject to HST. However, when you buy a newly built home from a builder you have to pay HST on top of the purchase price. Ouch!

Home inspector

I highly recommend getting a home inspection prior to purchasing the home you love, for all the reasons I outlined in my post Home Inspections: Important or Not? A home inspection is usually between $400 - $500 and is well worth the money. Not only will it help to identify any major issues before you officially agree to purchase the home, but it’s a great way to get an up close look at how to maintain your new home. If you do not have a home inspector that has been referred to you, I have a couple home inspectors that I would highly recommend. 

Other closing costs and adjustments

If the sellers have paid their hydro bill, condo maintenance fees, or property taxes in advance, for example, you would be responsible for paying them back for the advance payments they have made. Also, be prepared to pay activation fees for cable, phone and internet hook up with those service providers. Some of the utility companies may also charge you initiation/start-up/installation fees. And if you want to hire movers to do the heavy lifting on moving day make sure to add that cost as well. 

Wiggle room

My advice would be to make sure you have some wiggle room and a little extra money stashed away for the “just in case” scenario. It’s never a comfortable feeling to know you have been stretched to your absolute limit and a small expense could push you over the edge.

Summary of Closing Costs for $700,000 home

Due when your offer is accepted or just shortly after:

Deposit: usually 5% of the purchase price so $35,000

Home inspector: $450 average

Due by the closing date:

Down payment: minimum of 5% on the first $500,000 and 10% on the additional $200,000, so $45,000 (subtract the deposit amount from this number)

Total Land Transfer Tax if purchasing a home in Toronto: $20,200 total **

Total Land Transfer Tax if purchasing a home outside of Toronto: $10,475 total **

** If you are a first time home buyer, you can deduct $2,000 from the provincial land transfer tax and $3,725 from Toronto's municipal land transfer tax owing.

Lawyer fees: $2,500 approximately plus HST, plus title insurance 

Appraisal: $350 approximately

Real estate agent fees: free of charge in most cases

HST: No HST on re-sale homes, but expect to pay 13% on homes purchased from a builder


Up next - Step 4: Gather The Funds Needed To Buy Your New Home

Check out:  

Step 1: Get Your Finances In Order
Step 2: Get A Mortgage Pre-Approval 

Do you have questions about the home buying process? That's what I'm here for! Drop me an e-mail or give me a call and I'd be happy to help.