Saving to buy a house is more than a down payment

You’ve been saving and you’re ready to take the next step—buying a house. Maybe you’ve done the math already and know how much you need to save for your down payment. Did you add in all the other costs...those costs that can take you by surprise and put a big dent in your budget?

To be on the safe side you should set aside several thousand dollars in addition to the money you’ve saved for your down payment. If you don’t use it all on closing costs then you can use it on the house.


A deposit is the money that you offer the seller as a demonstration of your commitment when you make an offer on their house. If your offer is accepted the deposit is place in trust until the closing of the sale and is applied toward the down payment. If the sale fails to close due to your actions, your deposit may be given to the seller as compensation for breaking the contract.

Down payment

A down payment is the money you put toward the purchase price of a home. This money is not financed as part of the mortgage. Your down payment must be at least 5% of the purchase price.

Inspection fee

When you make an offer on a home, it’s likely you will make a home inspection a condition of your offer. A home inspector will go over the house and give you a report about the condition of the home. Costs for this service will vary.

Appraisal Fee

An appraisal estimates the value of a property. A financial institution may want an appraisal of the property you plan to buy to be sure that its value is sufficient security for the mortgage.

Property Tax Adjustments

You will be responsible for paying property taxes for the portion of the year that you own the property. If the seller had pre-paid taxes for a set period of time, you will need to reimburse the seller for those costs.

Interest Adjustments

The day you close the sale of your new home may not be the day of your first mortgage payment. You may have to pay the interest accrued on your mortgage principal between the date the mortgage funds are advanced and your first payment date. For example, suppose your mortgage payments will be made on the first of every month. If the mortgage funds are advanced to you on May 15, you would pay the accrued interest (earned May 15-May 31) on June 1 and your first regular mortgage payment on July 1.

Legal Fees

You’ll need a lawyer to help finalize the sale and help protect your interests during the transfer of the property. Fees will include the lawyer’s time and disbursements.

Mortgage Insurance

If your down payment is less than 20% you will need to use a high ratio mortgage insurance provider, such as Canadian Mortgage and Housing Corporation (CMHC) or Genworth. You can opt to pay this money up front or include it in your mortgage.

Home Insurance

Until you have completely paid your mortgage, the lender has a stake in the property and will insist it is insured against fire and other damage.

Life Insurance

This is an optional cost. You may want to purchase enough life insurance to cover the amount of the mortgage, to help protect your family in the event of your death.

Connection Fees

Many service providers—phone, alarm, utilities, cable and other services—will charge a fee to hook up services in a new location.

Moving Costs

Whether you hire a moving company or rent a truck, there are costs involved in moving. You’ll need boxes, packing material and tape. At the very least you should feed the friends that helped you haul your heavy furniture to your new home.


Your home may need immediate maintenance. The price of your new home may have been reduced because the furnace needs to be replaced or the roof needs new shingles. Those costs will still need to be paid.


If you are purchasing a newly constructed home, you will likely be required to complete certain elements of your landscaping within the first year. You may also need to build a fence.

Other Purchases

You may need to make some purchases right away, such as appliances or window coverings. Maybe you’ll need a lawn mower, a garden hose or a snow shovel. Many small purchases can add up quickly.

Sources: Home Buyers Guide; Canadian Mortgage and Housing Corporation

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