Understanding Closing Costs When Purchasing Real Estate

First-time homebuyers may have questions about the additional costs they will incur besides their down payment when purchasing real estate. Closing costs typically amount to 1.5% of the total purchase price and include land transfer tax, municipal land transfer tax (if applicable), legal fees, title insurance, home/property insurance, appraisal fees, Status Certificate fees (if required), and Mortgage Default Insurance (if the mortgage is high-ratio). Homebuyers should budget for these costs to simplify the home buying process.

Understanding The Deposit With Your Offer To Purchase

When you make an offer to purchase real estate, you will have to provide a deposit together with your Offer to Purchase. A Deposit makes up part of your total down payment and will be credited against the total amount owing on the closing date. ​

Home Inspection Fees

It’s always a good idea to request a home inspection as a condition in your Offer to Purchase. Most accepted offers are contingent upon the results of a home inspection being satisfactory to the buyer. Home inspections often range from $350 to $550 and must be conducted by a home inspector. ​

Land Transfer Tax Fees

When purchasing land in Ontario, Land Transfer Tax is required to be paid to the Province. In Toronto, both Provincial and Municipal Land Transfer Tax are required to be paid. The tax rates are calculated based on the purchase price. The tax rates are 0.5% on the first $55,000 of the purchase price, 1.0% on the amount exceeding $55,000 up to and including $250,000, 1.5% on the amount exceeding $250,000 up to and including $400,000, 2.0% on the amount exceeding $400,000 up to and including $2,000,000, and 2.5% above $2,000,000.​

Title Insurance 

Today, almost every single mortgage lender demands title insurance to safeguard against any damages and losses that may arise in the event there are any conflicts or debates related to title. Title Insurance is usually $100-350. ​

​Buying a house on Well and Septic Water

When purchasing a home that uses well water and a septic tank, you must ensure the water is potable by obtaining a potability certificate or water quality report from your local municipality or third-party company. The certificate confirms the water meets public health requirements and is safe for human consumption. The certificate must be no older than 60 days at the time of closing. If the house has a septic tank, it may require an inspection before closing to ensure it is in good working order.​

Costs Associated With Buying A Condo

If you are purchasing a condominium, you will require a Status Certificate or Estoppel Certificate which usually costs approximately $100. This document outlines the status and financial health of the Condominium Corporation along with any potential legal matters it may be involved in which could impinge on the reserve fund needed to maintain the building. It also indicates whether or not the previous owner has paid their common elements fees and is up-to-date. 

Home and Fire Insurance

Home insurance is necessary when buying a property to safeguard your home and provide liability coverage. An insurance binder is a one-page document that confirms your home and you are insured, and your lender is the "loss payee." It is mandatory at closing. It is advisable to consult with multiple insurance companies to find the best policy for you.

​First Time Home Buyer Land Transfer Tax Refund

If you are a first-time home buyer, you are eligible to receive a refund of up to $4,000 off the land transfer tax. This is credited to you right at the time of closing. ​

Legal Fees and Purchasing Real Estate

Legal fees usually range between $900-$2,000 plus HST. We usually can recommended three to four real estate lawyers to help you compare prices.

Including Closing Costs Into Your Mortgage

Mortgage default insurance can be added to your mortgage amount and amortized with the rest of the loan, but land transfer tax, home inspection fees, and legal fees cannot be included. The cost of mortgage default insurance depends on the down payment amount. If the down payment is less than 20% of the purchase price, CMHC default insurance is required. Contact us for information on how to calculate the premium.​

Ready to Purchase Your Dream Home? Let Us Help You Navigate the Home Buying Process with Confidence! Contact Sarah Today to Learn More About Your Mortgage Options and Get Expert Advice on the Best Solution for Your Unique Needs.​