Home buying closing costs are the charges your lawyer presents to you on the closing date of your home. Many people are surprised at the additional costs, over and above the purchase price of the home. According to the Canada Mortgage and Housing Corporation you should have at least 1.5% of the purchase price for closing costs, in addition to the down payment. I suggest around 2% to 2.5% to be on the safe side.
Here is a list of closing costs to consider when purchasing of your home.
Your lawyer can provide a realistic estimate for you.
Some lending institution charges to process your mortgage application. If you negotiate your mortgage where you usually do your regular banking, it's possible the bank may waive the application fee.
The appraisal provides the lender with a professional opinion of the market value of the property. The appraisal fee is normally the borrower's responsibility and it can range between $100 to $300 plus GST. Sometimes the costs may be higher for larger, custom-built homes or homes in remote areas.
On the purchase of a newly constructed home, GST is payable. It does not apply to most resale homes.
Home Inspection Fees:
A professional home inspection is for the benefit of the buyer. A typical home inspection can cost anywhere from $300- $400, and is well worth the investment. If the home is older than 5 years, a home inspection is a must. When hiring a home inspector, make sure the inspector has liability insurance, in case a mistake is made.
All mortgage lenders require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties. If you are arranging a “high-ratio” mortgage (less than 25% down payment) you will need to purchase mortgage insurance.
Land Transfer Tax:
This tax is payable by anyone who purchases property in Ontario. Your lawyer can help you calculate how much tax you will pay on your purchase.
Land Survey Fee or Title Insurance Fee:
A recent property survey is usually required by the lender. If one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of the survey, most lenders today will accept Title Insurance, at a much lower price of approximately $250.
A lawyer will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus G.S.T.
Maintenance and utility costs:
Make sure you budget for heating, electricity, water and any immediate renovations you may have planned. Your home will require regular maintenance, so be sure to budget for those expenses too.
An estimate should be made for closing adjustments, for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser's responsibility. Your lawyer will let you know what they are exactly, once the various searches have been completed.
Don't forget about the other costs incurred with your purchase: cable & phone set-up fees, moving expenses.
Home buying closing costs are a significant factor in the purchase of any property.
Please consult with appropriate professionals for further assistance.