BUYERS TIPS

The cost of home buyer

If you’re planning to buy a house or condo in Toronto Area (GTA), don’t forget to be prepared for the dreaded Closing Costs. Never fear, knowledge is power! Know what you might have to pay for, so you can work it into your budget ahead of time.

Here is a list of the most common and important closing costs when buying a home:

Closing Costs: Before Closing
  • Deposit (usually 5% of the purchase price, paid within 24 hours of your offer being accepted)
  • Property Appraisal ($400- $500, often paid by the lender)
  • Home Inspection ($400-700, paid to the home inspection company at the time of the inspection)
Closing Costs: On Closing
  • Balance of Purchase Price (the purchase price less your initial deposit. Usually the bulk will come from your lender and become your mortgage)
  • Legal Fees (amount varies depending on purchase price – approx $1,800 for a $500,000 purchase)
  • Title Insurance (sometimes included in your legal fees, $250-$400)
  • Mortgage Broker Commission (if applicable, usually paid by the lender)
  • Property Survey (if required – $1,000-$2,000)
  • Ontario Land Transfer Tax (varies depending on the purchase price – see our Land Transfer Calculator)
  • Toronto Land Transfer Tax (varies depending on the purchase price – see our Land Transfer Calculator)
  • Property Tax Adjustment (reimbursement to Seller of property taxes they paid beyond the closing date)
  • HST (generally only applicable on new construction condos and houses)
  • Tarion Warranty Fees (warranty on new construction condos and houses only, not resale)
  • Provincial Sales Tax (only applicable on chattels purchased from vendor – amount varies)
  • Adjustments for Utilities/Condo Fees/etc (reimbursement to Seller for prepaid utilities, etc.)
  • CMHC Insurance Premium (insurance premium charged if you have less then 20% down payment – click here to estimate CMHC insurance)
Closing Costs: After Closing
    Moving Expenses ($1,000+)
  • Utility Connection Charges (varies)
  • Redecorating and Renovating Costs (varies)
  • Immediate Repair and Maintenance Costs (varies)

According to CMHC and GE Capital, one should have, in addition to the down payment, at least 1.5% of the purchase price for closing costs (we say 2-2.5%, just to be on the safe side). The costs vary across provinces, and for that matter, cities.h5

Below you will find a brief explanation of these costs, yet it may not include all items required specific to your property, or the area in which you have purchased.h5 This is a guideline, but your lawyer can provide a fairly close estimate, and is the best resource.

Appraisal Fee:

The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower's responsibility and it ranges as low as $100 for a drive-by appraisal to as much as $200 for a full appraisal, and the average being $175, plus HST. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.

Home Inspection Fee:

A professional inspection of the home, top to bottom, is for the benefit of the buyer, therefore, that's who absorbs the cost. A typical home inspection can cost anywhere from $250-$350, but our opinion is that they are well worth the investment. New home buyers may not worry about it, but a definite must for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.

Fire Insurance:

All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least 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.

Land Survey Fee Or Title Insurance Fee:

A recent Survey of the property is usually required by the lender, and 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 $225.

Legal Costs and Disbursements:

A lawyer or notary 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 HST.

Land Transfer Tax:

Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price (refer to mortgage ABC's for exact calculation).

New Home Warranty:

In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.

Mortgage Application and Processing Fee:

On a high-ratio insured mortgage (mortgages above 80% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.

Closing Adjustments:

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/notary will let you know what they are exactly once the various searches have been completed.

H.S.T.:

On the purchase of a newly constructed home, HST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say "Plus HST" or "HST Included", and who gets the HST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees).

The other cost may include landscaping, redecorating, furnishings and appliances repairs.

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