I can’t tell you how many times I’ve talked to the first-time homebuyers and saw that they didn’t have clear ideas about the actual amount of money they had to pay by the closing date. This brings me to the point I want to make in this article.
The closing date is the day when the ownership of the property is officially transferred from the seller to the buyer. This date is set during the negotiation phase, and is usually several weeks after the offer is formally accepted. The following events take place on this date:
- Your down payment less the deposit and the mortgage funds are provided to your lawyer.
- Your lawyer pays the seller, registers the property in your name, and gives you the deed and keys to your new home.
The purchase price of the real estate you are buying is only one of the costs you’ll encounter. Usually, closing costs range from 1.5% to 4% of your purchase price.
Here are other additional costs you need to consider:
Money required before your mortgage pre-approval
- Deposit. A deposit that counts towards your down payment is required when you make an Offer to Purchase.
- Home inspection fee: These expenses are not mandatory; it’s up to you. However, it is highly recommended to put a home inspection as a condition of your Offer to Purchase. The inspection protects you by revealing any problems in the property and costs between $200-$500 (depending on the complexities of the inspection).
Expenses Connected With Your Mortgage
- Mortgage loan insurance: If your down payment is less than 20% per cent of the purchase price, you will need mandatory mortgage loan insurance. Mortgage default insurance, or CMHC insurance, is not normally considered a traditional closing cost as it is added to the total mortgage you require.
- Appraisal fee: An independent appraiser has to determine the value of the property you are buying and whether it meets your bank lending criteria. This fee is mandatory; however it is often covered by the lender. The cost is usually between $250 and $350.
- Mortgage broker’s fee: If you use a mortgage broker, a fee may be charged to arrange a mortgage on your behalf.
Mandatory closing costs covered by the home buyer
- Land Transfer Tax (LTT): It is calculated as a percentage of the purchase price. First time home buyers qualify for a maximum $2,000 (LTT on a $227,500 home) provincial rebate and a maximum $3,725 (LTT on a $400,000 home) City of Toronto rebate.
- Legal Fees and Disbursements. You can expect to incur a minimum of $500 (plus GST/HST) on legal fees, which account for the preparation and recording of official documents. (Disbursements are the costs involved in drawing up the title deed, conducting a title search, and preparing and registering the mortgage.)
- Title Insurance. Today, most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and costs $100 – $300.
- Land survey: The lender may ask for a current survey or certificate of location before signing off on the loan. There can be a substantial cost for having a new survey done on the property.
- Goods and Services Tax: Resale homes are exempt from GST but it does apply to newly built houses and condos.
Ontario New Housing Rebate
If you have built or bought a new house or condo, or dramatically renovated your home during last two years, you may be eligible for an Ontario new housing rebate.
- If you bought a new condo or town home, you may be eligible for over $30,000 in HST Rebates
- If you bought a new house, you may be eligible for up to $24,000 in HST Rebates!
Toronto Real Estate Agent, Nina Timoshyna
Right at Home Realty Inc., Brokerage
Nina Timoshyna is a real estate agent with about 15 years of experience in real estate business. If you considering selling your home or buying a property in Toronto or the GTA, she would be your best choice to help you with all your real estate needs.
As a real estate professional, Nina Timoshyna serves clients in Toronto and the GTA: Aurora, King City, Newmarket, Maple, Richmond Hill, Vaughan, and Woodbridge.