Closing Costs 

Generally speaking, you can expect to pay anywhere from 2% to 5% on closing costs when you buy a home. Here is a rundown of the closing costs that may be on your list:

Appraisal – Buyers are responsible for paying for appraisals, which run in the price range of $400 to $500. Before lenders agree to extend a loan, they’ll want to verify the value of the property being purchased. Ideally, the appraised value will match the purchase price. If the buyer is requesting more money for a mortgage than what the home is actually worth, the lender likely won’t agree to the loan unless the buyer is able to bridge the gap themselves. 

Home inspection – It’s highly recommended that buyers have a home inspection conducted on the home they agree to purchase. Including a home inspection clause in their contract will give buyers a chance to have the home scoped out by a professional to uncover any major, minor and latent problems that may not have been noticed during the initial walk-through. Home inspections can cost anywhere between $400 to $700, depending on the size and condition of the home.

Lawyer fees – In the GTA, it’s customary for real estate lawyers to be involved in real estate deals. There is quite a bit of paperwork that will need to be signed in the lawyer’s office, which your attorney will look over to make sure you’re entering into a sound agreement. And the lawyer is the one who usually hands over the keys when the deal is done. The fee charged varies quite a bit from one deal to the next, but you will probably pay between $2,000 to $3,000 on average in legal fees.

Title search fees – If these fees aren’t already included in the legal fees, you’ll pay an additional $250 to $400 for a title search to be conducted and title insurance to protect you in case something is found on the title that could impact the transaction. A title search is important because it will make sure that the title is free and clear of any issues, such as liens. It will also ensure that the person selling you the home has the legal right to do so.

Land transfer taxes – Whenever a property is transferred from one party to another, land transfer taxes are applied. For those buying real estate in the GTA, there are two separate land transfer taxes to be paid: municipal and provincial. The amount is determined based on a percentage of the price of the property. The rate is different in every province and is applied based on the price of your property. They tend to be between 0.5% and 2%. For example, a $500,000 home, you’ll have to pay a total of $12,950 ($6,475 for each type of land transfer tax).

Adjustments – Any property taxes, utilities, or condo fees that the seller has already paid for after the closing date will have to be reimbursed to the seller.

Fire insurance: In Canada, it is essential to take out fire insurance at the point of taking possession of your property. The mortgage lender will require this in order for you to receive the money. Most insurance companies will want you to have your home inspected before insuring the property. Go through these proceedings early so you don’t encounter any problems when you want to move into your new home.

Mortgage default insurance – If you put less than 20% down towards your purchase, you’ll have to pay mortgage default insurance, which is based on the amount of your down payment:

  • 5% to 9.99% = 4%
  • 10% to 14.99% = 3.1%
  • 15% to 19.99% = 2.8%

Other related fees: On top of those fees, as a homeowner, you will also have to pay the yearly property and school taxes, electric and utility bills, home and fire insurance and any debt that you may have (such as car or furniture loans). On top of that, you should also consider maintenance costs. Your roof will eventually have to be replaced, things might break down, you might want to repaint, etc. All of these things constitute homeownership fees.

*These closing costs were initially published by Loans Canada *

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