Buyers Closing Costs
When buying a home, there are expenses outside of your mortgage that you will need to include in your budget. A good rule of thumb is to budget about 1.5 - 2% of the purchase price for closing costs. Following is the closing cost checklist that you can use to keep track of your expenses. While your down payment and mortgage will cover the purchase price of your home, it's wise to consider the other expenses involved in buying a home. You'll pay some costs at the beginning of the home-buying process and others, known as closing costs or disbursements, when your home purchase is finalized.
Appx Cost: $150 - $200
This is the fee for determining the property lending value for mortgage purposes. Your bank will have hired an independent appraiser to determine the value of the property and whether it meets its lending criteria. This may or may not be required depending on the type of property being purchased.
HOME INSPECTION FEE
Appx Cost: $500
The home inspector evaluates the structures and systems that make up your home and provides you with a written report. Professional Home inspection is included as a condition in the Offer to Purchase.
Appx Cost: $750 - $1,000
A survey indicates the boundaries and measurements of the land and positions of major structures, and any registered or visible easements (such as a driveway) or encroachments (such as a neighbour's fence) on the property. Generally provided by Sellers.
LAND TRANSFER TAX (LTT)
Ontario's Land Transfer Tax is a provincial tax payable by the purchaser upon the acquisition of an interest in land by registered conveyance or unregistered disposition. Therefore, if you purchase a property or land you are responsible for paying Land Transfer Tax to the province at the time the transaction closes. If the property you are purchasing is located in Toronto you will also be subject to the Municipal Land Transfer Tax. Go to Land Transfer Calculator on left panel to calculate LTT.
LEGAL FEES AND RELATED EXPENSES
Appx Cost: $1,000 - $2,000
Legal fees are what a lawyer charges you for acting on your behalf. It is a service fee. Your Lawyer must pay all of the overhead expenses including rents, insurance, professional dues, equipment and personnel from this. Disbursements are expenses that your lawyer charges you for out-of-pocket expenses that you would otherwise be required to pay if you handled the transaction yourself.
If you are purchasing a resale home or a new home under $400,000 there is no HST charged. If you are purchasing a new home over $400,000 HST will be applied. Although there is a new 75% housing rebate of the Ontario component of the HST up to a maximum of $24,000. On average you should not pay more than you would have under the old system.
Appx Cost: $250
Title insurance covers problems that may arise due to encroachment issues (for example, a structure on your property is actually part of your neighbour's property and needs to be removed), existing liens against the property's title, title fraud, undischarged mortgages and other issues relating to the property's previous owners.
INSURANCE COSTS FOR HIGH-RATIO MORTGAGES
Usually, mortgage default insurance premiums range between 0.5% and 2.75% of the principal plus applicable fees. If your down payment is less than 20% of the purchase price of your home, you must pay a one-time insurance premium on your mortgage amount. You can make arrangements to pay the premium to before closing, or it can be added to the principal amount of your mortgage. If it is added to the principal amount of your mortgage, you will pay interest on it at the same interest rate you pay on the principal amount of your mortgage.
Appx Cost: $100 - $1,000
You will need to pay interest on any gap between the closing date of the purchase and the first payment date of the mortgage. You can avoid an interest adjustment by arranging to make your first mortgage payment exactly one payment period after your closing date.
PREPAID PROPERTY TAX AND UTILITY ADJUSTMENTS
Appx Cost: $400 - $500
You will be required to reimburse the vendor for any prepaid property taxes or utility bills.
Appx Cost: $600/year
Protection for your home and contents.
MORTGAGE LIFE INSURANCE
Costs vary but can be conveniently included in your regular mortgage payment. Mortgage life insurance is optional and provides peace of mind. It protects your family’s financial security by paying off all or a portion of your mortgage in the event of the premature death of you or your spouse.
KEEP OTHER COSTS IN MIND AS WELL
Will your new home need furniture? Carpets? Lighting? Window coverings? Appliances? Do you have the tools you need to maintain the lawn and gardens? Are you hiring movers or renting a truck? Will you need boxes, bubble wrap and tape for the move?
While these and other out-of-pocket costs aren't part of the real estate transaction, you still need to budget for them. Plan your expenses as much as possible. If necessary, decide what you can put off buying until later, after you move in and get settled.