I get asked this question a lot by Buyers: Which of the costs associated with a house purchase must be paid up front, and which can be rolled into the mortgage?
Deposit – [cash, with contract] – The deposit [usually 5% cash] is paid to the Seller at the time the offer is accepted. The deposit is put into a trust account (held by the Seller’s real estate brokerage or lawyer) and not touchable until closing. The deposit goes towards the price of the house and can be used as part of the downpayment.
Land transfer tax – [paid in cash, on closing] – Land transfer tax is a big part of the price to be paid on the day of closing. It cannot be bundled with the mortgage.
Downpayment – [paid in cash, on closing] – The buyer decides how much of their money they will use for the purchase. The rest owed must be borrowed from a from a lender and this constitutes the mortgage. The minimum downpayment is 5% (which can be the deposit).
Mortgage (CMHC) insurance – [bundled in with the mortgage] – if you have less than 20% down, you need to pay for CMHC insurance. This cost gets bundled up into the mortgage so you don’t have to pay up front. It’s the only fee that can be added to your total mortgage amount.
Lawyer fees and Adjustments– [paid in cash, on closing] – Lawyer fees will be around $1000 plus other costs that are incurred by the lawyer (registration fees, courier costs). There also may be some adjustments- money the seller paid in advance (like property tax, utilities) that the buyer has to reimburse.