When completing your home purchase transaction it is important to understand and be prepared for the closing costs associated with your transaction. If you fail to prepare for these costs your transaction may be cancelled at the lawyer’s office simply because you lack the funds to close. The amount required on closing differs based on the type of transaction but a borrower should ensure a cost estimated between 1.5% and 3% of the purchase price is set aside for closing costs.
1. Mortgage Default Insurance (High Ratio Insurance) – Variable
Depending on the amount of the mortgage and down payment, this number will vary. While the default insurance premium is typically included in the mortgage, the PST charged on this premium is not. Usually mortgage default insurance premiums range between 0.5% and 2.75% of the principal plus applicable fees.
If your own down payment is less than 20% of the purchase price of your home, you must pay a one-time insurance premium on your mortgage amount. For your convenience you are able to add this amount to the principal amount of your mortgage, you will pay the same interest rate on it that you pay on your mortgage.
2. Land Transfer Taxes (if applicable) LTT - Approx – $2000.00
This tax is calculated by using a formula where you pay .5% on the first $55,000 of the purchase all the way up to 2% on any amount exceeding $400,000. First time home buyers are eligible for a refund of up to $2000
3. Toronto Land Transfer Tax (MLTT)
The City of Toronto requires that Toronto residents pay an additional Municipal Land Transfer Tax. As of February 2008 this tax must be added to the LTT.
4. Legal Fees - Approx. $1000 – $2000
You lawyer is required to perform a variety of legal tasks upon closing. Reviewing the Agreement of Purchase and Sale, preparing the transfer, registering the deed and mortgage and preparing the closing documents are just some of these tasks.
Make sure your lawyers quote includes all expenses and disbursements and not just legal fee’s. Discuss your offer to purchase with your lawyer prior to signing. A good lawyer is your best interests.
5. Title Insurance – Approx. $200 – $300
Title Insurance is required upon closing. This insurance provides coverage title-related risks with real estate transactions. Protection is provided for you from things such as fraud or forgery, undischarged mortgages, errors in the survey, restrictive covenants, encroachment issues and condominium status certificates.
6. Property Insurance - Approx. $450
This amount ranges depending on the coverage.
7. Status/Estoppel Certificate – Approx. $100
This is for condominiums purchasers only. This document describes the condominium corporation’s financial and legal affairs.
8. GST/HST – Varies by province
This tax is sometimes included in the sale price if not it must be paid upon closing. New homes closing after July 1, 2010 are subject to HST all new home buyers qualify for a rebate www.cra.gc.ca.
9. Property Survey - Approx. $750 – $1000
A property survey indicates the boundaries and measurements of the land and positions of major structures. It also will specify any registered or visible encroachments or easements on the property.
10. New Home Warranty
Through Tarion – the corporation that regulates the home building industry new home owners are required to buy for each home they build warranty coverage.
1. Home Inspection – Approx. $300
The home inspector evaluates the structure of your home and provides you with a written report.
2. Appraisal Fee – Approx. $300 – $400
An appraisal determines the property lending value for mortgage purposes.