CLOSING COSTS TO EXPECT
First-time-home buyers expect to make a down payment in order to finalize the purchase of their home, but some overlook the fact that there are closing costs that must also be paid before they’ll be able to move in.
Having a firm understanding of these potential closing costs is incredibly important, as you don’t bring cash to the table when you make your offer; you do so when it is time to take possession. If you don’t have this cash, not only will you not be able to finalize the purchase of your new home, but you will also be in violation of the contract agreement to buy. Cost estimates are approximate, but be prepared that you will incur the following closing costs when you buy your home. You will need to have cash available, as closing costs cannot typically be financed.
1. LAND TRANSFER TAX
When a home changes hands, many provinces and a few municipalities charge a property transfer tax or title transfer fee. Rates are usually on a scale of 0.5% to 2% of the home’s value and can add thousands to your purchase price. First-time homebuyers qualify for rebates or exemptions in some provinces.
2. APPRAISAL FEE
Your lender may ask you to have a home appraised to confirm its market value. Fees vary depending on a property’s value and complexity, but are typically around $400.
3. LEGAL FEES
A lawyer or notary will help protect your interests by reviewing your purchase agreement, searching the property title, and ensuring that all documents are completed properly. Basic legal fees start between $500 and $800, plus disbursements, with added services as needed.
4. HOME INSPECTION
An inspection can help make you aware of issues related to a house’s structure and systems, such as plumbing and electrical, and recommended or necessary repairs. Fees range from about $350 to $450
5. HOME INSURANCE
Your lender will require proof that the property is insured in case of fire and other damage. Insurance cost vary, depending on the coverage needed, but budget for at least$500 – $1000 a year
6. COSTS FOR NEWLY CONSTRUCTED HOMES
If you’re buying a brand-new home, be prepared to settle any items not quoted in the original price, including upgrades or paving and landscaping fees. New homes are also subject to 5% GST or 13% HST, although this is often included in your purchase price. A federal rebate reduces the GST or the federal part of the HST to about 3.5% for homes valued at $350,000 or less.
7. GET HOME / PROPERTY INSURANCE
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.
8. TAX ON MORTGAGE INSURANCE
If you have less than a 20% down payment, your lender will require that you obtain mortgage default insurance. You can roll the cost into your mortgage payments, but the PST is due at closing. For example, if your mortgage insurance is $5,000 and the PST is 8%, you’ll pay $400.
9. TITLE INSURANCE
Title insurance can safeguard you against fraud and problems with your property title or survey. Fees range from $150 to $350.
10. 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 re-key your locks, and cleaning supplies.