Real estate closing costs are charges your lawyer will require from you on closing day in order to complete your transaction. Some people are surprised at the amount of funds required in addition to the price of the home. It is our suggestion that you have 2.5% of the purchase price for closing costs in addition to your downpayment. We strongly recommend that you contact your lawyer before you enter into an agreement. They will be happy to provide you with a breakdown of the expenses you can expect to pay. Closing costs can vary throughout Durham Region.
Here is a list of some of the closing costs you might encounter. Every real estate transaction is unique so you might face a charge in addition to these. Your lawyer will provide you with a more accurate estimate.
Appraisal Fee
Your mortgage company might insist on a professional appraisal of the property you are purchasing. This is generally required with a new home. The buyer generally pays for it which can run around $300. A call to your mortgage company can confirm this.
Professional Home Inspection
When purchasing a resale home, you should consider having a home inspection completed. It might reveal something that you did not see and make you decide not to proceed with the deal. The charge for this can run $300 - $400.
Fire Insurance
Your mortgage company will require that the property be insured from the time you take possession. You will have your insurance company send a letter to your lawyer confirming coverage is in place. Your lawyer cannot close unless they have this. The cost of a policy will be determined by the amount of coverage, property size, where the property is located and the insurance company. You can expect to pay from $300 and up. Your insurance company will be happy to give you a quote.
Provincial Sales Tax on Mortgage Insurance
When you make a downpayment of less than 20% of the purchase price, the mortgage must be insured in the event of default.The insurers in Canada are CMHC, AIG and Genworth. In most cases the insurance premium is added to the mortgage principle. The sales tax on the premium must be paid at closing. To determine how much tax you will have to pay, contact your mortgage company.
Property Survey or Title Insurance Fee
It is a good idea to ask the seller of the property you are buying to give you a copy of the property survey they have in their possession. If they don't, the cost for a new one can start at $700. At one time mortgage companies required one in order to finance a property. This has changed with title insurance being accepted which cost considerably less.
Lawyers Fee and Disbursements
Your lawyer will charge you a fee to complete your transaction. They will conduct searches, prepare the mortgage, draft the deed, etc. Disbursements are the costs your lawyer will payout on your behalf to complete the purchase. These include long distance calls, photo copies, registration fees and so on. Your lawyer will be happy to give you a breakdown of these closing costs.
Land Transfer Tax
This is a provincial tax payable by buyers of real estate in Ontario. It is based on the purchase price of the property. You can call your lawyer to determine the amount or use this Ontario Land Transfer Tax Calculator.
New Home Warranty
Tarion runs the Ontario new home warranty program. It is protection for the buyer in case the builder does not finish or repair problems with the home. The cost to register the home with Tarion is around $700 and is paid by the buyer.
Adjustments
In some cases the seller has prepaid some expenses for the property. A common one is property taxes. The buyer will reimburse the seller for any amount paid past the day the buyer takes possession. Another adjustment would be in a case where the property is heated by oil. The seller will fill the tank on closing day which the buyer will pay for. Your real estate lawyer will be happy to give you an estimate of these costs.
GST
GST is paid on new homes and those that have been substancially renovated. If you are buying from a builder, determine who is paying this tax. In most cases the builder has included it in the purchase price. If you are buying a home that has been completely rebuilt, do not sign anything until you check with your lawyer. You might be responsible for paying GST on the purchase price.
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