closing

If you’re a first time home buyer, you may be wondering what sort of costs you’ll be facing down the road when it comes time to close the sale on your home. Because there are so many fees, expenses, and taxes to pay, it may be a little scary and overwhelming. Below is a list of the general costs you’ll need to be aware of when you’re closing the deal.

As a rule of thumb, expect and budget approximately 2 – 3% of the purchase price of your home for closing costs. That means if you’re buying a $200,000, you’re looking to pay around $4,000 – $6,000 in total for closing costs. Of course, this is only a general outline, so make sure to ask every person involved in the deal to get a better scope of your costs.

• Home Inspection – A qualified inspector will assess your property for any potential defects as well as give you vital information on your home. Expect to pay anywhere between $250 – $350.
• Appraisal - The lender will arrange for an appraiser to provide a professional opinion on the current market value of your home. This will cost anywhere between $100 – $300.
• Legal Fees - Your lawyer will be handling all the vital paperwork related to the purchase of your home. You will be paying for the legal fees for closing your home and mortgage, as well as paying additional disbursement fees that cover things such as courier costs, photocopies, faxes, supplies, and other registrations. Remember to ask for a quote including the disbursement fees so you’re not in for a surprise later. Fees vary, but they generally range from around $1,000 – $1,300 depending on the circumstances and the lawyer.
• Land Survey or Title Insurance – The seller will most likely provide you with a survey of the home. If no survey is available, you can usually get a replacement for around $600 – $900. However, many lenders will also accept title insurance instead, and that alternative will only cost you a couple hundred dollars. Make sure to ask your lender and check your options.
• Fire Insurance – Be prepared to arrange and maintain fire and extended coverage insurance for the balance of the mortgage or the replacement value of the building. This cost will vary depending on your home, the amount of coverage, the insurance company, and even the city, but expect to pay anywhere between $250 – $600 annually.
• Ontario Land Transfer Tax – Read my previous article about land transfer taxes and how to calculate them for your purchase.
• Interest Adjustment – Oftentimes, mortgage payments are due on the first of the month. If you closing date does not fall on this day, you’ll usually have to prepay the amount of interest accruing up to the 1st of the following month. This is known as the interest adjustment date. If you’ve opted for bi-weekly or weekly payments, this period will be shorter.
• Mortgage Insurance & PST - If your mortgage is insured, the insurance premium will usually be added to the mortgage so you don’t have to pay in cash on the closing date. You will, however, have to pay the provincial sales tax of 8% on closing.
• Closing Adjustments – This typically covers the utilities that the seller has prepaid for and will recover from you.

Are you buying a new home? Don’t forget that you must pay GST on brand new home purchases! Resale homes already have the GST included in the price. Other costs that you should think about are moving costs, appliances, decorating, repairs, tools, and utility hook ups.

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