Closing Costs

One of the first things I like to ensure my clients are aware of when starting the home buying process is the additional liquid cash they’ll need for closing costs to complete the purchase of their new property, on top of their downpayment. Often overlooked, closing costs include legal and administrative expenses you’ll be responsible for that often can’t be rolled into your mortgage payments. They can range anywhere from 1-4% of the actual home’s price, depending on the specific property and usually look after the following:

Land Transfer Tax

Land transfer tax is a provincial or municipal tax levied when someone purchases a property. Depending on where you are purchasing you pay this tax to the province, city, or both. The amount due is a sliding scale but your lawyer will be able to help you calculate the amount you owe, and pay it to the city once title has been changed to your name. Here's a breakdown of what it looks like in Ontario and Toronto:

Ontario Land Transfer Tax:

0.5% of the value of the property up to and including $55,000
1% of the value which exceeds $55,000 up to and including $250,000
1.5% of the value which exceeds $250,000 up to and including $400,000
2% of the value between $400,000 and $2,000,000
2.5% for amounts exceeding $2,000,000, where the land contains one or two single family residences

Toronto Land Transfer Tax:

0.5% up to and including the first $55,000
1% of the value which exceeds $55,000 up to and including $250,000
1.5% of the value between $250,000 and $400,000
2% of the value between $400,000 and $2,000,000
2.5% of the value over $2,000,000

Luckily, first-time buyers may be eligible to receive a refund for land-transfer tax. More details on the Land Transfer Tax Refund Program can be found HERE.

Property Appraisal

Your mortgage lender may request that you have your property appraised to get the property’s current market value and ensure that you are paying a fair price. While not always required, you may need one to secure financing and even though sometimes the bank may end up paying for it, it’s best to be prepared to pay for it out of pocket, which can cost you between $300-$850.

Home Inspection

A home inspection is a common condition on an offer to purchase and it will help detect potential problems or repairs that are needed on the property. They also help you determine if any problems with the property could be considered dealbreakers and if they aren’t, help you determine and budget what it could cost to repair them. Home inspection fees vary based on the size, age, and type of property; you are looking at paying upwards of $300 for one.

Lawyer Fees  

You're required to retain a real estate lawyer to act for you in purchasing and mortgaging your new home. Your lawyer will prepare and supervise the signature of several important documents and is responsible for title search and registration. If you do not already have a real estate lawyer, you can shop around for one once your offer is accepted. The price you will pay will depend on the purchase price of the home and can range from $1500 - $3000.

Insurance

Home insurance protects you in case of a disaster like flooding or fire that damages your property and will need to be active on the new property by closing day. You can usually transfer your existing home insurance or, use the opportunity to shop for competitive rates. Your lender will also require the insurance to be in place before the mortgage funds are released. The average cost in Ontario is $1250 and is dependent on the property and location.

Another optional insurance that you will want to consider before closing is title insurance. Title insurance protects you against problems like fraud, easements, or zoning with the title on your home, even if they existed before you purchased the property.  While not required to close, it is a good idea to speak to your lawyer and discuss if it is right for you. Title insurance is usually around $2000 and is a one-time purchase.

Property Taxes, Utilities, Condo fees

The purchase price of a home is always subject to adjustments at closing. What this means is depending on the time of year you purchase, the seller may have prepaid property taxes, utilities, or condo fees before you close and take ownership. Prior to closing your lawyer will assist you with a statement of adjustments so that the seller is reimbursed for the costs from the closing date forward.

Moving costs

You always want to make sure you budget for moving costs whether you plan to hire movers or not. Movers generally cost $600 and up, or you can rent your own truck which can cost $200 and up. You will also want to consider buying moving boxes, packing materials and additional materials for anything that needs extra care like a marble table. I personally love the option of renting reusable plastic moving boxes that are delivered right to your home and picked up once you’re done.

Hopefully this summary of closing costs helps you budget when looking to buy your next home. If you have any questions about closing costs or anything real estate please reach out, I am here to help!

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