Buying a home is expensive and getting hit with unexpected costs is never fun. Your down payment is one thing but having enough money set aside for Closing Costs is just as important. We’ll sort your costs into two groups – what you should expect at your lawyers office – and what you should plan for outside of that.
Let’s first talk about Lawyers Office:
This is where we would estimate you budget an amount equal to 1.5% of your purchase price, over and above your down payment.
- Legal fees.
Your lawyer will help protect your interests by reviewing your purchase agreement, searching the property title, the status certificate if it’s a condo and ensuring that all mortgage documents are completed properly. They handle all money in the purchase and work with your lender and the Sellers lawyer to complete the transaction.
- Land transfer tax.
When a home changes hands, most provinces charge a property transfer tax. Rates are calculated based on your purchase price and can add thousands to your purchase price. First-time home buyers qualify for instant rebates of up to $4,000 at the time of writing. Your lawyer will tell you how much is payable, if any.
- Prepaid costs or new hook up costs.
If the seller has paid property taxes, water bills, or utilities in advance, you’ll need to reimburse these at closing. This can add hundreds to your upfront costs, but means these bills will be paid for your first months in your new home. If this is your first home and you’ve never paid for utilities before be prepared for set up fees & deposits for electricity, gas, water & cable.
- Tax on mortgage insurance.
If you have less than a 20% down payment, you will have mortgage default insurance premium added to your mortgage balance. PST, however, is still due at closing. For example, if your mortgage insurance is $5,000 and the PST is 8%, you’ll pay $400.
- Title insurance.
Title insurance can safeguard you against fraud and problems with your property title or survey. It is a one time cost of approximately $350 and is mandatory by all lenders. Note, if you are a Power Workers Union member, they offer a one time benefit of free Title Insurance.
- Interest Adjustment Date payments
If you are adjusting your mortgage payments to line up with your payroll deposits, there will be a number of days of interest only at the start of your mortgage. The interest charges between your Closing Date and the Interest Adjustment Date is typically included in your Closing Costs.
Again, these are all part of what you will see when meeting with your lawyer. Budget 1.5% of the purchase price of the home as an estimate. Your lawyer will tell you in advance what the actual number is. Understand that any deposit on purchase, will go towards your down payment amount.
What Other Costs Should You Plan/Budget For?
- Appraisal fee.
Your lender may require an appraisal to confirm its market value. Costs begin at $325 and can be up to $500, depending on the location of the property.
- Home inspection.
An inspection can help make you aware of issues related to a house’s structure and systems, such as plumbing, electrical, insulation & the presence of any harmful mold / UFFI and recommended or necessary repairs. Fees range from about $350 to $600. Your Realtor will be able to recommend a good Home Inspector.
- Home/fire insurance.
Your lender requires proof that the property is insured in case of fire and other damage to protect their investment. Insurance costs vary, depending on the coverage needed, but budget for at least $800 a year.
- Moving-in costs.
Before the big day, budget for all those last minute things: $100 or more to rent a van or a few hundred for professional movers, $50 to $60 for a locksmith to change your locks, and cleaning supplies. Don’t forget the beer & pizza for the friends that helps as well! Such incidentals can easily come to $500 or more.
Once you are in your home, its time to start thinking curtains, blinds and furnishings. These don’t have to be up front but costs do add up quickly here as well. We partnered with The Brick to bring you commercial pricing on furnishings and appliances. We have heard of furniture and mattress savings of up to 40% from our existing clients. Ask us for details!
Keep in mind that these are just the basic closing costs when it comes to purchasing a home. If you are selling your existing home you can also expect to pay Realtor fees, penalties to break your existing mortgage if you aren’t porting, bridging costs for your down payment & any repairs the new owners have requested. Welcome to the game of home ownership!