When you are buying a home on PEI, the down payment is usually the number buyers think about first. It is important, but it is not the only cash you need. In addition to your down payment, you should also budget for closing costs, inspections, legal fees, insurance, tax adjustments, moving expenses, and the early costs of setting up your new home.
A good rule of thumb is to plan for 1.5% to 4% of the purchase price for closing costs, on top of your down payment. The Financial Consumer Agency of Canada says home buyers should be prepared for upfront costs such as home inspection fees, legal fees, property tax adjustments, and title insurance.
One of the largest PEI-specific costs is Real Property Transfer Tax. In Prince Edward Island, this tax is 1% of the greater of the purchase price or the assessed value of the property. It is calculated and paid when the deed is registered with the Registrar of Deeds. For example, on a $400,000 home, the transfer tax could be about $4,000 unless an exemption applies.
You should also budget for legal fees and disbursements. Your lawyer handles the title search, reviews the purchase documents, registers the deed and mortgage, adjusts taxes and utilities, and makes sure the transaction closes properly. Legal costs can vary depending on the property and the work involved, so it is wise to ask for an estimate early in the buying process.
A home inspection is another common cost. While not always required, it is often worth considering, especially for older PEI homes, rural properties, cottages, waterfront homes, or properties with wells and septic systems. A standard inspection can help identify visible concerns with the roof, foundation, electrical, plumbing, heating, insulation, drainage, and general condition before the purchase becomes firm.
Buyers may also need extra inspections or testing. On PEI, this could include water testing, septic review, oil tank inspection, chimney inspection, electrical review, or a specialist opinion on moisture, structure, or roofing. These costs depend on the property, but they can be very important when buying outside municipal water and sewer areas.
You may also need to pay for title insurance, an appraisal fee if required by your lender, mortgage default insurance if your down payment is less than 20%, and home insurance before closing. Your lender will normally want proof that the property is insured before the mortgage funds are released.
There may also be adjustments on closing. For example, if the seller has prepaid property taxes, fuel, condo fees, or other costs, you may reimburse them for your share from the closing date forward. These adjustments are handled by the lawyers but still affect the amount of money you need at closing.
Finally, remember the practical costs: moving, utility hookups, furniture, appliances, immediate repairs, paint, window coverings, tools, lawn equipment, snow removal, and emergency savings. In PEI, heating costs are especially worth planning for, particularly with older homes or larger rural properties.
So, what costs do you pay besides the down payment? You should expect closing costs, transfer tax, legal fees, inspection costs, insurance, possible appraisal fees, adjustments, and moving expenses. A local Century21 PEI REALTOR® can help you understand which costs are most likely for the property you are buying and help you plan your PEI real estate purchase with fewer surprises.
Sources
Financial Consumer Agency of Canada — Buying a Home
Used for general home-buying cost guidance, including upfront expenses beyond the down payment such as legal fees, home inspection costs, property tax adjustments, title insurance, moving costs, and ongoing affordability considerations.
Financial Consumer Agency of Canada and Costs of Buying a Home
Government of Prince Edward Island — Real Property Transfer Tax
Used for PEI-specific closing cost information, including how Real Property Transfer Tax is calculated when a property changes ownership in Prince Edward Island. This source supports the article’s explanation that buyers should budget for transfer tax as part of their closing costs.
Gov’t of PEI and Real Property Transfer Tax
Canada Mortgage and Housing Corporation — Mortgage Loan Insurance Requirements
Used for information on mortgage loan insurance, including general qualification requirements for buyers with less than 20% down and how insured mortgages work in Canada. This source supports the article’s discussion of costs that may apply when a buyer has a smaller down payment.
