Buying a home involves more out-of-pocket than just the down payment. There are also closing costs to pay for items such as title searches, disbursements fees, inspections, courier charges, etc. Closing costs are on top of the purchase price.
How Much Are Closing Costs?
As a rule of thumb, closing costs to buy a home run about 2 to 4 percent of the purchase price. The total closing costs to purchase a $300,000 home could cost anywhere from approximately $3,000 to $12,000 or more.
Here are some closing costs that should considered:
1. Closing Adjustments: There are a number of property expenses that the seller may have prepaid and will need to be reimbursed for by the buyer. They include: 1. Municipal property tax, 2. Utilities such as heating, hydro and water. 3. Condo maintenance fees, if applicable. Could be up to $1000.
2. Legal/Notary Fees and Disbursement: The lawyer reviews Offer to Purchase, searches the title, draws up mortgage documents and looks after closing details. Can vary between $800 and $2,500.
3. Appraisal Fees: Appraisal of property is only required for conventional mortgages to confirm market value before finalizing your mortgage. Between $150 and $500. If insured by CMHC or Genworth, there are no appraisal fees.
4. Land Transfer Tax: Fee charged to the purchaser when a property changes ownership. This is generally the largest portion of closing costs on a resale home. Can range from 0.5% to 2.0% of the value of the property (varies by province and municipality).
5. Interest Adjustment: You will need to pay any interest accrued between your closing date and your first scheduled mortgage payment. This has to be paid on the Interest Adjustment Date. Between $100 and $1,000 (varies by closing date and selected payment frequency).
6. Title Insurance Fee: Title Insurance can protect against fraud, forgery, title defects, and survey problems. Approximately $175 - $250 for title insurance.
7. Home Inspection Fee: Recommended before finalizing offer to purchase because it may reveal areas where repairs are required. Between $200 and $500.
8. Property/Fire Insurance: Proof of insurance required by closing date and it must at least cover replacement value of home and contents. Up to $800 annually.
9. Status Certificate: ONLY FOR CONDO PURCHASES. It outlines a condominium corporation's financial and legal state of affairs. Up to $100
Recurring Closings Costs
Recurring fees are those charges that you will pay again and again. They include such fees as:
- Home Insurance Premium
- Flood insurance (if required in your area)
- Property Taxes
- Mortgage Insurance Premiums
- Prepaid Interest
The time of the year that you close will dictate how many prorata months of premiums the lender will collect to hold against future payments of taxes and insurance.