Condo closing costs are a series of cash transactions the buyer needs to pay at the time possession is handed over.

As we’ll see below, each closing cost isn’t outright expensive.  But because there’s so many of them, new condo buyers feel like everyone is out to get their money.

To make things worse, closing costs are paid in cash.  They can’t be rolled into the mortgage.  So if you’re unprepared, you may be in for a nasty surprise come closing day.

In this article, we go over the most common condo closing costs, how much they are and the reason you have to pay them.

The King of Condo Closing Costs: The Down Payment

This is the largest condo closing expense you’ll be making.

In Canada, the minimum down payment for any real estate purchase is 5% of the purchase price.  Some people recommend putting down 20% (to avoid paying CMHC fees).

That said, the down payment shouldn’t come as a surprise to a condo buyer.  It’s money you need to have in your possession before you start your condo buying process.

When Is the Down Payment Due?

At the time you’ll take possession of the keys during closing, the down payment will be due.

However, for those living in markets where you can buy pre-construction condos, down payments on new builds are different.

With new condos, the builder will ask for a first deposit at the time you sign.  This can be years before the condo is made available to you.

In other words, you need a chunk of cash when you sign.  After that you’ll be handing over the remainder of the deposit in usually 3 other installments.

The final payment will be due on closing (the day you get the keys).

If you’re buying a new or resale condo, not having the down payment on time can be a breach of contract.  This can lead to some nasty financial penalties.

Land Transfer and Ownership Taxes Are Condo Closing Costs Too

These condo closing fees have many names depending on where you live:

Land Transfer Tax, Ownership Tax or Welcome Tax (Taxe de Bienvenue).

They all come down to this:

• They’re expensive.
• They’re due at the time of closing, or shortly after you move in.

If this is your first condo, some programs exist that help attenuate the final bill.  However, being tax credits, you still have to pay up front while you wait for the refund to arrive.

For most, there’s usually no way around these taxes.

Land transfer taxes are based on property value. Unlike the CMHC fee, they can’t be rolled into your mortgage.

Here’s an example to put this condo closing cost into perspective:

Let’s look at a condo purchase based at the GTA’s average cost of $352,000.

• You’d pay about $3,240 for the Toronto Land Transfer Tax.
• The provincial portion is another $3,750.

As we mentioned above, first-time home buyers are entitled to substantial credits. In some instances, this can be up to $4,000.

If you file your taxes yourself, be sure to check for that option in your software. If you use an accountant, remember to let him or her know of this expense.

How and when you pay this condo closing cost depends on the province you’re in.

The land transfer tax is usually paid at the time of closing with the lawyer.  But in some provinces, municipal property transfer taxes come in a few weeks after you move in.

Municipal Levies Can Be Unpredictable Condo Closing Costs

Interest Adjustments Due on Closing

This is an often misunderstood condo closing cost.

Why?

Because not every buyer needs to pay it.  It affects both pre-construction and resale condo buyers.

Essentially, it’s the interest on the mortgage you aren’t paying between your closing day and the day your first mortgage payment comes out.

Here’s an example:

Let’s say your closing date is set for September 15th.  However, your payment schedule is set so that the bank withdraws the first mortgage payment on October 1st.

That’s 15 days you had possession of the condo and didn’t pay your mortgage on.

Even though you’re not scheduled to pay until October 1st, interest on your mortgage interest still accrues.

Interest payments start the minute you get the keys to the property.  The bank will want that money up front.

No such thing as a free lunch!

Here’s a simplified example with a mortgage of $300,000 at 2.75% using the schedule mentioned above:

• Interest on the mortgage : $300,000 x 2.75% = $8,250
• Adjusted day to day: $8,250 / 365 days = 22.60 $/day
• Interest adjustment: 22.60$/day x 15 days = $339.04

The interest adjustment payment is paid on closing date.  The real estate lawyer or notary will collect the money.

In rare situations, you can have the lender tack it on your first mortgage payment.  But it comes down to the same thing.  That money will come out of your bank account.

While interest adjustments aren’t the saltiest of condo closing costs, they add up with the other ones.

Pre-Paid Property Taxes and Pre-Paid Condo Fees

This is another variable condo closing cost dependent on the move-in date.  It affects both pre-construction and resale condo buyers.

Depending the municipality, condo owners can choose how often they pay their taxes.  They can pay monthly, quarterly, twice a year or even for the whole year in one lump sum.

Here’s how this closing cost works:

If the seller prepaid property taxes for the entire year, you’ll need to reimburse them a portion of that amount when you close.

The calculation starts from the date you take possession to the date the seller paid up to.

The same concept applies to condo fees.

What about new builds?

It’s the same concept, except that in this case the developer paid the taxes.

You’ll owe them the difference between when the builder paid up and the time you take possession of the condo.  This happens when there’s delays in delivery.

Both pre-paid property taxes and pre-paid condo fees are paid in cash at the time of closing.

Legal Fees, Another Hefty Condo Closing Cost

Real estate transactions require the involvement of legal professionals.

In English Canada, that’s a lawyer.  In Quebec, it’s a notary.

These are an unavoidable expenses necessary for closing a condo.  There’s no way around them.

Here’s the bad part.

Expect to pay between $1,000 and $2,500 in legal fees depending on the details of the sale and the city you’re in.

Legal fees are due at the time you take the keys at the lawyer’s office.

The Overlooked Title Insurance

Title Insurance protects the home owner against losses due to title defects. Title defects are problems that prevent free and clear ownership of a property.  They include situations like:

• Right of way.
• Neighboring encroachments.
• Unpaid liens against a condo.
• Fraud and forgery.
• Zoning non-compliance.

It’s never obvious that there may be title defects.  They’re rare, especially when buying a condo.

The problem is, when there is one, it’s extremely expensive to fix since it involves lawyers and real estate agents.

Thankfully, title insurance covers the new owner for existing title defects.

Yet another closing cost right?

Luckily, not all real estate transactions require it.  Before you choose to buy title insurance, discuss it with your real estate agent and lawyer.

How much title insurance costs depends on a set of factors.  It’s between $150 to $350 and is arranged at the time of purchase.

Yet Another Condo Closing Cost: The Home Inspector

When buying a resale condo, always hire a home inspector.

Home inspectors can uncover construction flaws which can save you thousands in renovations, rising condo fees or special assessments.

Don’t make the mistake of not hiring one just because you’re buying a condo.

Reviewing the status certificate is not a replacement for an inspection.

Home inspectors, like every other real estate professional, charge for their services.  A reputable home inspector will go from $200 to $400 depending on the size of the property and the city.

Unlike the other condo closing costs, a condo home inspection gets paid at the time of the inspection, not at closing.

Moving: Many Small Condo Closing Costs

You finally get the keys to your place and you’re ready to move in.

Time to spend some more money!

Between getting the keys and moving in are a series of small moving expenses that can add up quickly.  Here’s a list of the most common ones:

• $100/day to rent a van (ie UHaul)
• $50 for pizza and beer to pay your friends for helping you move
  • Or, $700-$1000 for professional movers
• $50 for a professional locksmith to change your locks
• $50 in cleaning supplies
• $20 for extra key fobs
• $20 for elevator rental

Some of these expenses may not apply to your purchase but it’s best to plan for them so there aren’t any surprises.

New Account, Hookup Fees and Utility Adjustments

Most utility and service companies charge their clients hookup fees.  These can be anywhere between $40 to $60 per provider.

Now consider that condos make use of the following services:

• Internet and Telecommunications
• Hydro or Electricity
• Natural Gas
• Furnace and AC Protection Plans
• Hot Water Rental

You can see how hookup fees add up quickly.

These fees will be due on your first bill, so about 30 or 60 days after you move in.

If you’re a first-time condo buyer, there’s a few more condo closing costs lurking around the corner.

Service providers will charge you a one-time “new account” fee.  These range from $20 to $30.

Wrapping This Up

As you can see, condo closing costs are a series of small transactions that add up quickly.  But by knowing what to expect, you can better prepare yourself financially.  Buying a condo is an exciting experience, don’t let closing costs ruin it for you!