Getting hit with unexpected costs on the closing of your home is never fun especially when you haven’t budgeted for them. Surprises are great but not when it comes to your finances & budget. We’ve listed the top closing costs to keep in mind when looking to buy a home.
1 Land transfer tax.
When a home changes hands, many provinces and a few municipalities like Toronto charge a property transfer tax or title transfer fee. Rates are usually on a scale of 0.5% to 2% of the home’s value and can add thousands to your purchase price. First-time home buyers qualify for rebates or exemptions in some provinces. Our land transfer calculator can give you an exact dollar amount of the land transfer tax that you will need to pay on closing of your new home.
2 Appraisal fee.
Your lender may ask you to have a home appraised to confirm its market value. Costs begin at $300 and can be up to $500, depending on the location of the property.
3 Legal fees.
A lawyer will help protect your interests by reviewing your purchase agreement, searching the property title, the status certificate if it’s a condo and ensuring that all documents are completed properly. Basic legal fees start between $600 and $800, plus disbursements, with added services as needed.
4 Home inspection.
An inspection can help make you aware of issues related to a house’s structure and systems, such as plumbing, electrical, insulation & the presence of any harmful mold / UFFI and recommended or necessary repairs. Fees range from about $350 to $450. If you are looking for a good inspection company visit our friends at Rock Solid Home Inspections and let them know we sent you!
5 Home/fire insurance.
Your lender will require proof that the property is insured in case of fire and other damage to protect their investment. Insurance costs vary, depending on the coverage needed, but budget for at least $500 a year. Need to review your insurance or get a quote on insurance visit our friends at Youngs Insurance and they will set you up with the best coverage for your individual needs.
6 Costs for newly constructed homes.
If you’re buying a brand-new home, be prepared to settle any items not quoted in the original price, including upgrades or paving and landscaping fees. New homes are also subject to 5% GST or 13% HST, although this is often included in your purchase price. A federal rebate reduces the GST or the federal part of the HST to about 3.5% for homes valued at $350,000 or less.
7 Prepaid costs or new hook up costs.
If the seller has paid property taxes, water bills, or utilities in advance, you’ll need to reimburse these at closing. This can add hundreds to your upfront costs, but means these bills will be paid for your first months in your new home. If this is your first home and you’ve never paid for utilities before be prepared for set up fees & deposits for hydro, gas, water & cable.
8 Tax on mortgage insurance.
If you have less than a 20% down payment, your lender will require that you obtain mortgage default insurance. You can roll the cost into your mortgage payments, but the PST is due at closing. For example, if your mortgage insurance is $5,000 and the PST is 8%, you’ll pay $400.
For more on Mortgage Insurance, see our blog What is “Mortgage Insurance” and How Does It Benefit YOU?
9 Title insurance.
Title insurance can safeguard you against fraud and problems with your property title or survey. Fees range from $150 to $350 and is mandatory by all lenders.
10 Moving-in costs.
Before the big day, budget for all those last minute things: $100 or more to rent a van or a few hundred for professional movers, $50 to $60 for a locksmith to change your locks, and cleaning supplies. Don’t forget the beer & pizza for the friends that helps as well! Such incidentals can easily come to $500 or more.
Keep in mind that these are just the basic closing costs when it comes to purchasing a home, if you are selling your existing home you can also expect to pay Realtor fees, breakage penalties on your existing mortgage if you aren’t porting, bridging costs for your down payment & any repairs the new owners have requested.
11 Interim Tax Bill
You may be responsible for the existing tax bill on the property that you purchase. This could be as high as half your annual property taxes (i.e. if the annual property taxes is $5000 per year, you may be responsible for $2500) The exact amount will be known by the lawyer at closing. Contact your lawyer to get actual fees.