The 10 closing costs you need to prepare for

The prospect of shopping for a new home can be very exciting – that is, until your offer is accepted and your dreams start to become a reality. In my experience working with first-time buyers, it’s the fear of the unknown next steps that can make the process of buying a home stressful.
 
In order to help take the fear of the unknown out of the equation, I have compiled the below list of the 10 most common closing costs that you need to understand.
 
1 – Land transfer tax
Ontario and Toronto charge a property transfer tax or title transfer fee. The rates are usually on a scale of 0.5 per cent to two per cent of the home’s value and can add thousands to your purchase price, but first-time homebuyers qualify for rebates up to two thousand dollars. Visit my site www.CallRoger.ca/buyers and use the Land transfer calculator to calculate the land transfer tax in Ontario and Toronto (where it’s doubled!)
 
2 – Appraisal fee
Your lender may ask you to have the home appraised to confirm its market value. Several strategies are used to appraise property. The two most common methods for property valuation are:
Cost approach, which determines value based on the estimated cost of building a near identical structure; and
Sales comparison approach, which determines value based on the recent sales of properties possessing similar structural characteristics.
 
Costs for a property appraisal can begin at around $200, and can go up to $400, depending on the location of the property.
 
3 – Legal fees
A lawyer will help protect your interests by ensuring that all of the paperwork and transactions are completed and filed accordingly. A real estate lawyer would be responsible for reviewing your purchase agreement, researching the property title, and registering the home in your name. A real estate lawyer is very important when a purchasing agreement has been made. Basic legal fees start at around $800, plus disbursements, with added services as needed.
 
4 – Home inspection
An inspection will make you aware of issues related to the property’s structural systems, such as plumbing and electrical, which might factor into your offer. A home inspector should be able to give expert analysis of the property’s structural integrity, and should be able to make knowledgeable recommendations for any necessary repairs after purchase. Fees range from about $250 to $450.
 
5 – Home insurance
Your lender will require proof that the property is insured in case of fire and other damage. Insurance costs may vary widely, depending on environmental conditions surrounding the property, regional weather patterns, and the condition of the property itself. Despite this, you should budget for at least $500 a year.
 
6 – Costs for newly constructed homes
If you are buying a brand-new home, be prepared to settle any items not quoted in the original price, such as property upgrades or paving and landscaping fees. New homes are also subject to 13 per cent HST, which is often included in the purchase price. A federal rebate reduces part of the HST to about 3.5 per cent for homes valued at $350,000 or less.
 
7 – Prepaid costs
If the seller has paid property taxes, water bills, or utilities in advance, you need to reimburse the seller at closing. This may add several hundred dollars to their upfront costs, but this will also mean that these charges will be prepaid for their first few months in your new home.
 
8 – Tax on mortgage insurance
If you have less than a 20 per cent down payment, you lender will require that you obtain mortgage default insurance. You can roll the cost into their mortgage payments, but the PST is due at closing. For example, if the mortgage insurance is $5,000 and the PST is eight per cent, you will pay $400.
 
9 – Title insurance
Title insurance can safeguard you against fraud and problems with their property title or land survey. Fees range from $150 to $350.
 
10 – Moving costs
Before the big day, be encouraged to budget for any last-minute expenses: $100 or more to rent a van, or a few hundred for professional movers; $50 or more for a locksmith to rekey your locks; and cleaning supplies. Such incidentals can easily amount to $500 or more.
 
 
Hopefully the above list of costs will assist you in preparing, and help you alleviate some of the stress and fear you’ll likely be facing when moving forward with the purchase of your new home.

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Roger Townsend

Roger Townsend

Broker
CENTURY 21 People's Choice Realty Inc., Brokerage*
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