April 24, 2012
When you buy a home, the closing costs can be expensive and confusing.
We underestimated our closing costson our new house by about $10,000 and had to scramble a few days before closing to get the funds. We ended up borrowing from family which was a big headache for everyone involved. If I had to do it over again, I would ask more questions from the beginning.
Speak to your lawyer and your mortgage broker or banker early in the process, so you’re not faced with any surprises on the day the sale of the property closes. The lawyer will want a bank draft or certified cheque to cover the costs that day..
After we sold our condo, my husband and I bought a detached three-bedroom split level home in Scarborough for $559,900. The additional costs on closing are $18,200, 80 per cent of which are the provincial and municipal land transfer taxes that add up to about $14,600.
Legal fees and other disbursements add another $2,700. These fees include registering the deed and the mortgage, title insurance and incidentals.
Since we’re putting down less than the 20 per cent required for a conventional mortgage, we have to buy mortgage default insurance from the Canada Mortgage and Housing Corp. The HST on the premiums, about $900, is also due at the time of closing.
There are other expenses, too. Since the purchase closes before the sale of our condo, we have bridge financing to cover the down payment. The interest on the financing works out to about $26 per day for four days.
According to Canada Mortgage and Housing Corp., home buyers should budget the equivalent of 1.5 to 4 per cent of the purchase price for closing costs. They have a useful budgeting sheet that can help. Mortgage comparison site Ratehub.ca has a calculator that can help estimate the Land Transfer Tax.