How Much Are Closing Costs? 7 Expenses Homebuyers Need to Know

Beyond the Down Payment What Can be Expected for Closing Costs

Ask most homebuyers what they’re saving for, and they’ll probably say the down payment. It’s the biggest number, no question. But it’s not the whole bill.

When buying a home in Winnipeg, there are several other costs that can show up before you get the keys. Land transfer tax, legal fees, inspections, adjustments and moving expenses can easily add thousands of dollars to the amount you need.

And that’s where buyers can get caught. You can have enough money for the down payment and still not have enough cash to comfortably close on the home.

Here are the closing costs Winnipeg homebuyers should know about, including several that are easy to underestimate.

How Much Are Closing Costs in Winnipeg?

A common rule of thumb is to budget roughly 1.5% to 4% of the purchase price for closing costs, although the actual amount will depend on the property, mortgage and transaction.

On a $450,000 home, even 2% works out to another $9,000 on top of the down payment.

One of the biggest costs in Manitoba is land transfer tax. Then there are legal fees, inspections, property tax adjustments and the costs that come with actually moving into the home.

Beyond your down payment saved you need to be financially prepared for closing costs to be ready to buy.

1. Manitoba Land Transfer Tax

For Winnipeg buyers, this is one of the most important closing costs to calculate before making an offer.

Manitoba charges land transfer tax when a property changes ownership. The amount is based on the property's fair market value and uses a tiered system,

• 0% on the first $30,000
• 0.5% on the portion from $30,001 to $90,000
• 1% on the portion from $90,001 to $150,000
• 1.5% on the portion from $150,001 to $200,000
• 2% on the portion above $200,000

For example, the land transfer tax on a $450,000 home is approximately $6,650.

Access a Manitoba Land Transfer Tax Calculator.

Unlike some provinces, Manitoba also doesn't currently have a broad land transfer tax rebate specifically for first-time buyers.

Whether you're buying your first house or your fifth, this is a cost worth calculating early.

2. Mortgage Default Insurance

If your down payment is less than 20%, you'll need mortgage default insurance with Canada Mortgage and Housing Corporation (CMHC).

Mortgage Default Insurance is required by the Government of Canada when home buyers are putting less than the 20% down payment typically needed to qualify for a conventional mortgage. This type of insurance compensates mortgage lenders for losses caused by a mortgage default. The most common reason for defaulting is not making your mortgage payments.

The premium depends on how much you're borrowing compared with the value of the home.

At a loan-to-value ratio between 90.01% and 95%, for example, CMHC's standard premium is 4% of the mortgage amount.

Let's say you're buying a $450,000 home with 5% down.

Your down payment would be,

$22,500

Your base mortgage would be,

$427,500

A 4% mortgage insurance premium would add approximately,

$17,100

The mortgage insurance premium is most often added to the mortgage rather than paid entirely in cash at closing.

Manitoba buyers do not pay provincial sales tax on mortgage insurance premiums.

Adding insurance premium increases the amount you're borrowing and you are paying interest on that additional amount for years.

3. Legal Fees, Title Insurance and Registration Costs

A real estate lawyer handles several important parts of the transaction, including transferring ownership, registering the mortgage and making sure funds move between the appropriate parties.

Your final bill may include, 

• Lawyer's fees
• Registration charges
• Title searches
• Title insurance
• Other legal disbursements

Each expense might look relatively small beside a $400,000 or $500,000 home, but together they can add up.

It's worth contacting a real estate lawyer before you buy and asking for an estimate of the total cost rather than looking only at the advertised legal fee.

4. Home Inspection

A home inspection in Winnipeg is another expense worth including in your budget.

It's particularly important to think about when buying an older home and the approximate cost is $300-$500.

Winnipeg has plenty of houses that have been standing for decades. Depending on the property, an inspector may identify concerns involving the foundation, grading, roof, plumbing, electrical system, heating equipment or moisture.

Discovering a major issue after possession can be far more expensive than uncovering it early with a home inspection.

5. Appraisal and Lender Costs

Depending on your mortgage and lender, an appraisal may be required before financing is finalized. This could cost approximately $400-$500 plus depending if the lender is using their own appraisor or if you are required to hire one yourself. This cost will be required to be paid upfront and will not be included in the mortgage amount. 

The lender requires the appraisal so that they know the property is worth enough to support the mortgage you're taking out.

Sometimes the lender covers the appraisal, but most often the buyer does.

There may also be other lender-related costs depending on your mortgage and it is always good to request these costs early for clarification.

6. Property Tax Adjustments

Property tax adjustments are another closing expense that your lawyer calculates as part of closing.

Suppose the seller has already paid property taxes covering a period after your possession date. Since you'll own the home during that period, you will have to reimburse the seller for your share. This reimbursement will be made through the lawyer. 

Access Taxation and Assessment Winnipeg.

The amount depends on the property, possession date and what has already been paid.

7. Moving and the First-Month Expected Expenses

You may need to pay for movers or a rental truck, utility setup, internet installation, new locks, window coverings, furniture and appliances.

And there are always things you don't realize you need until you're standing in your new home.

Winnipeg's seasons can make that list even longer.

Move into a house before winter and suddenly you might need a snowblower, shovels or other winter maintenance equipment. Buy during the warmer months and it could be a lawn mower, hoses, landscaping equipment or exterior repairs.

Using Your FHSA and RRSP? Don’t Forget About Closing Costs

If you’re a first-time buyer, your First Home Savings Account (FHSA) and RRSP can be powerful tools for buying a home. But just because the money is available doesn’t mean every dollar should go toward your down payment.

Through the Home Buyers’ Plan (HBP), eligible buyers can currently withdraw up to $60,000 from an RRSP to buy or build a qualifying home. If you’re buying with a spouse or partner who also qualifies, each person can potentially make their own withdrawal.

You can also use the First Home Savings Account (FHSA) alongside the Home Buyers’ Plan for the same qualifying home purchase. FHSA contributions are generally tax deductible and qualifying withdrawals to purchase a home are tax-free.

There is one major difference between the two programs: FHSA qualifying withdrawals don't have to be repaid, while money withdrawn through the HBP generally does.

HBP withdrawals are typically repaid to your RRSP over a period of up to 15 years. If you don't make the required repayment in a given year, that amount may be included in your taxable income. You're also taking money out of your retirement investments, which means that money isn't earning potential investment returns while it's out of the account.

That's why it's important to look beyond the size of the down payment.

Suppose you have $50,000 available between your FHSA, an HBP withdrawal and other savings. If you expect to need $10,000 for land transfer tax, legal fees, moving and other closing expenses, putting the full $50,000 toward your down payment could use up the savings.

In that situation, you may really have closer to $40,000 available for the down payment if you want to keep $10,000 aside for closing and possession costs.

Before deciding how much to withdraw or put down, calculate your closing costs first. Then leave room for moving expenses, immediate repairs and an emergency fund.

The goal isn't to make the biggest down payment possible. It's to buy the home and still have enough cash to comfortably handle what comes next.

How Much Should You Save for Closing Costs?

A reasonable starting point is to set aside an additional 2% to 3% of your target purchase price, although your actual costs may be higher or lower. This should be a seperate savings goal aside from your down payment.

For example, suppose you're targeting a $450,000 Winnipeg home.

If you're putting 5% down, your down payment is $22,500.

But Manitoba land transfer tax alone would be approximately $6,650.

Then you still need to account for your lawyer, inspection, potential appraisal, adjustments, moving expenses and whatever the house needs immediately after possession.

Having exactly $22,500 saved will not make you financially prepared to buy a $450,000 home. You will also need to accomodate for the anticipated closing costs.

Don't Put Every Available Dollar Into the Down Payment

A larger down payment can certainly have benefits. It can reduce your mortgage and, once you reach 20%, may allow you to avoid mortgage default insurance.

Putting every available dollar into the house can leave you financially exposed and not leave you with enough cash left over to comfortably complete the purchase.

For example, if you have $60,000 available and expect to need $10,000 for closing and immediate possession costs, you don't necessarily have a $60,000 down payment.

You may have closer to $50,000 available for the down payment. The same thinking applies if you're using money from an FHSA or withdrawing from an RRSP through the Home Buyers' Plan.

Calculate your closing and immediate homeownership expenses first. Protect that money, then decide how much you can comfortably put down.

A Simple Winnipeg Home-Buying Budget

Here's what the numbers could look like on a $450,000 home with a 5% down payment,

Purchase price: $450,000
Down payment: $22,500
Base mortgage: $427,500
Approximate mortgage insurance premium: $17,100, generally added to the mortgage
Manitoba land transfer tax: approximately $6,650

And that's before legal fees, inspection costs, possible appraisal expenses, tax adjustments, moving and immediate household purchases.

That's why the down payment shouldn't be the only number you look at when deciding whether you can afford to buy.

Frequently Asked Questions About Closing Costs in Winnipeg

What are the main closing costs when buying a house in Winnipeg?

Common costs include Manitoba land transfer tax, legal fees and disbursements, title insurance, property tax adjustments, home inspection costs and potentially an appraisal. Buyers should also budget for moving and immediate homeownership expenses.

How much is Manitoba land transfer tax on a $450,000 home?

Using Manitoba's current land transfer tax brackets, the tax on a $450,000 property is approximately $6,650.

Does Manitoba have a first-time buyer land transfer tax rebate?

Manitoba does not currently offer a broad first-time homebuyer land transfer tax rebate comparable to programs available in some other provinces.

Do you need mortgage insurance with less than 20% down?

If you're purchasing a home with less than a 20% down payment, you'll typically require mortgage default insurance, subject to the property's and mortgage's eligibility.

Can closing costs be added to your mortgage?

Most closing costs need to be paid separately. Mortgage default insurance is an important exception because the premium can generally be added to the mortgage. Expenses such as Manitoba land transfer tax and legal costs should normally be budgeted separately.

Final Thoughts

The down payment gets most of the attention when buying a home, but it isn't the only number that determines whether you will be financially comfortable for the purchase.

Before making an offer in Winnipeg, calculate your Manitoba land transfer tax. Budget for your lawyer and inspection. Leave room for adjustments, moving expenses and the things you'll inevitably need after possession.

Most importantly, try not to arrive at possession day with every available dollar tied up in the house.

Buying the home is one expense.

Owning it starts the next day.

Tara Zacharias, REALTOR®