Buyer’s Closing Costs

1. Lawyer Fees

Buyers raise this at the time he/she engages the lawyer to close the deal. It is wise to choose a lawyer to work with before putting in an offer. Lawyers’ fees vary, budget for around $750 for their services.

On (or before) closing day, you will sit down with your lawyer and acknowledge other charges that you will incurr on closing day:

a. Discharge Penalties

If the buyer is discharging a mortgage on the property he/she is selling, there may be early discharge penalties amounting to three months interest on the mortgage to be discharged.  Other penalties may be imposed depending upon the terms of the contract.  The mortgage company may be prepared to waive all or part of the early discharge penalty if the buyer agrees to mortgage the new property with the same mortgage company.

b. Title Insurance

Most mortgage lenders are prepared to accept title insurance instead of a survey.  A Title Insurance policy costs about $250 – $300 for most residential properties.  The fee will vary to some extent with the value of the property, but all same, be part of your closing costs.

c. Disbursements

When your lawyer closes the purchase, he/she will have to pay a variety of expenses for you.  He/she will add these costs to the bill he/she sends you.  Such disbursement costs include fees for registering the deed and mortgage, building and tax certificates, hydro and water status reports, etc.  On a standard residential purchase, these costs will run between $300 and $500.

c. Adjustments

The annual real estate taxes will be apportioned to the Seller and the Buyer as of the date of closing.  If the Seller has prepaid the taxes for the year, the Buyer will be required to reimburse a pro rata portion to the Seller.  If the property is heated by oil, the Buyer will be required to reimburse the seller for the value of the oil remaining in the storage tank on closing.  The Buyer’s lawyer arranges these adjustments with the Seller’s lawyer as part of the closing process.

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2. Land Transfer Tax

This is a sales tax charged by the provincial government.  The formula used to assess the tax is as follows:

– 0.5% of the first $55,000 of the purchase price,

– 1.0% of the next $195,000 of the purchase price,

-1.5% of the next $150,000 of the purchase price, and

-2.0% of the balance of the purchase price (for residential properties).

-For example, the land transfer tax on a $400,000 purchase is $4,475, and it rises

at a rate of 2% thereafter (e.g. the tax on a $600,000 purchase is $8,475)

3. Property Inspection Report

Before you buy a property, it’s a good idea to have it inspected by a qualified professional property inspector. Keep in mind that inspector certifications aren’t mandatory in Ontario, the profession is not regulated (like the Real Estate Industry is with REBBA 2002).
The inspector should walk you through the home to point out flaws and defects, then provide you with a written report. Such inspections cost $400 or more, depending upon the inspector and the size of the property.

4. Mortgage Financing Fee’s

 Many mortgage companies charge appraisal and processing fees.  These fees can be several hundred dollars.  If you are borrowing more than 80% of the property’s value (high ratio financing), there will be mortgage insurance premiums added to the face amount of the mortgage, including H.S.T. Read more about CMHC mortgage insurance fees.

5. Survey

You may want a new survey, or your mortgage company may require one in order to advance the mortgage funds.  Surveys start at about $900.  The price goes up depending upon the size and configuration of the property.

6. Moving Costs

 Moving costs vary depending upon the distance moved and the weight and volume of possessions moved.  It is wise to get an estimate from more than one mover.  It is also wise to book your mover well in advance of closing.

7. Insurance Policies

An option to consider is obtaining a closing insurance policy (about $40) and/or a home warranty policy ($230-$350). As well, you will need property insurance and occupier’s liability insurance.  Contact an insurer well in advance of closing in order to ascertain the costs, and to have the policies in place at closing.

Not all types of Ownership are built the same. Depending on what type of property you want to own, you may have added expenses:

1. Condominium Purchase

There are some special costs involved with a condominium purchase.  For example, you will want a Status Certificate, which includes all important documents concerning the financial affairs of the Condominium Corporation, as well as the by-laws and the rules that owners are required to abide by.  The Status Certificate costs $100. Also, a condominium owner pays a monthly maintenance fee to the condominium corporation.  This fee will be apportioned between the Seller and the Buyer as of the date of closing.

2. Rental Property Purchase

If you are buying a tenanted property, any prepaid rents will be accounted for as part of the closing process, if you chose to assume the tenants. If the seller has collected the last month’s rent, which is standard, you will be credited with that sum on closing.

3. Rural/Recreational Properties

There are a number of issues that must be canvassed by Buyers of rural/recreational properties.  They included water quality and quantity, the condition of the septic system, road access, and availability and cost of municipal services (e.g. garbage collection, schools, busing, road maintenance). All such issues need to be investigated fully at the time of purchase.  Some of these investigations will cost money.  For example, you may be required to pay a fee for the water quality and quantity tests (basic water tests are free at Home Depot, and you can drop them off at the City Water Department for testing). Also, if you wish to have a professional assessment of the condition of the septic system, there will be a fee.  You will want to consider all of these issues at the time you are considering the purchase.

4. New Home Purchases

The biggest extra cost that attaches to new home purchases is HST.  HST is a 13% sales tax imposed by the federal government on new homes, as well as most other goods and services.  It is not applied to purchases of resale (“used”) homes.  Many builders include the HST in the purchase price.  Make sure that the issue of who pays the HST is resolved in the Agreement of Purchase and Sale.  Read your contract carefully.  There may be additional costs for a wide variety of items, including paving of the driveway, landscaping, etc.  On some new home purchases, the bill for these “extras” can be thousands of dollars

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