It is not just new home buyers that are unaware of the additional fees that come with purchasing a home. Many buyers are surprised by the closing costs that come with the purchase of a property. In this article we will highlight what you as a buyer can expect to pay on top of the purchase price of your next property. This list is not exhaustive and you should keep in mind that these figures are rough estimates and different circumstances may influence these numbers.
House Inspection: Budget for $500
The first additional cost that you will have to pay once your offer has been accepted is the Home Inspection. This inspection is a very important opportunity to discover anything that is, was, or could possibly be “deficient”. Although prices vary, is this something you really want to cut corners on? On the other hand, you do not need to pay more than necessary either. Budget for and try to stick to around $500.
Legal Fees: Budget for $1,500.
Typically you are looking at a flat fee plus disbursements and registration fees. Different types of properties have different fees associated and different lawyers have different rates. Expect to pay $1500 or more. Unfortunately this number may be more depending on how complicated the transaction is.
Land Transfer Tax
In Ontario you pay tax based on the purchase price of the home. The rate is 0.5% on the first $55,000, 1% on anything between $55,000 and $250,000, 1.5% on anything between $250,000 and $400,000, 2% on anything between $400,000 and $2,000,000, and 2.5% on anything over $2,000,000. Toronto and Montreal pay an additional Municipal Tax as well. If you are a first time home buyer, you may qualify for a tax refund equal to the full value of the land transfer tax up to a maximum of $4,000.
Title Insurance: Budget for $300
Title is a legal term for ownership of a property. When you purchase a property, the title is in your name. Title insurance protects the property buyer against challenges to the ownership of the property or problems related to the title. It protects from problems (even pre-existing) with the title which prevents free and clear ownership. This includes such things as encroachments, easements, fraud, zoning non-compliance, among other things. Title insurance is a onetime fee usually paid at closing.
Additional Closing Costs: Budget varies
Furthermore, there are other expenses that you should be budgeting for that may be more difficult to predict. One of these expenses would be the adjustments for such things as prepaid utilities or taxes. There is no way of knowing the exact amount until the lawyers review and calculate. Additional costs that you have more control over include any property insurance and moving fees. A little bit of preparation and you can shop around for the best rates and save a few dollars. You may cut some costs by moving your own things with the help of some friends, but many lenders will want to see proof of insurance as part of your mortgage approval. They want to make sure that if something happens to the property such as it burning down, that there is a way that they can get their money back.
“Soon To Come” Fees: Budget varies
Do not overlook any costs such as taxes, condo fees, or home owner association fees. Although these costs may not be due immediately, they will be shortly after you move in. Therefore, you should budget and plan for them so you are not surprised when the bills come in.
So as you can see, there are many closing costs that buyers may not be aware of. It is important to consider these additional fees so that there are no surprises and as the bills add up, the money does not run out. If you have any questions or concerns about purchasing a home and the closing costs that come with it, please contact Ryan Ligeza. I look forward to hearing from you.