Closing Costs Outlined


When a property changes hands between buyer and seller, both parties must pay "closing costs". These are various fees that are associated with the transaction but are not included in the selling price. Individuals who are not prepared for these "closing costs" may find themselves scrambling for cash on closing day.


The Seller’s costs may include:

  • Brokerage Fees
  • Title Insurance and escrow fees
  • All or part of a home protection plan
  • Paying loan/mortgage charges
  • Lawyer fees

The Buyer’s costs may include:

  • Fees associated with obtaining a mortgage
  • Title insurance
  • Land Transfer Taxes
  • Inspector fees
  • Lawyer Fees

The Canada Mortgage and Housing Corporation (CMHC) and GE Capital suggest that you should expect to pay an additional amount of at least 1.5% of the purchase price in closing costs. To be on the safe side, it is best to have a reserve of at least 3% of the purchase price should extra costs be incurred upon closing.


Fire Insurance

All mortgage lenders require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally the amount of the mortgage or the replacement cost of the property. Fire insurance can range from $200 to $600 on most conventional properties but have been known to exceed this range on larger, more lucrative properties.


Legal Costs

A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting various searches on the property being purchased.


Closing Adjustments

An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser's responsibility.


Appraisal Fee

The appraisal provides the lender with a professional opinion of the market value of the property. This cost is normally the buyer’s responsibility and it ranges between $100 to $300. Appraisal fees may be higher for larger, custom-built homes or homes in remote areas.


Land Transfer Tax

Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price. In Ontario, first time home buyers who purchase a new home are eligible for a refund of up to $2000. In Toronto first time home buyers are eligible for a refund of up to $3725.00.


Mortgage Application and Processing Fee

On a high-ratio insured mortgage (mortgages above 75% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.


Survey & Title Insurance

In most cases, the agreement of purchase and sale will have a clause asking for the vendor to provide a survey to the purchaser at their cost within a certain period of time. If the vendor does not provide you with an acceptable survey, you may need to obtain a new survey, which may run between $500 to $900. In most cases however, the survey is provided by the vendor. In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $250. A title insurance policy can eliminate the requirement for a new survey. Title insurance is an insured statement of the condition of title or ownership of real property, at the time the policy is issued.


Home Insurance

Home insurance premiums will vary from one insurance company to another and according to your insurance needs. Condominiums include the building insurance in your maintenance fees and they do not form part of the closing costs.


Home Inspection (For Resale Homes)

Prior to buying a home, you should have a home inspection performed to identify any significant structural, electrical or plumbing problems with the home. Some lending institutions require that you have a home inspection completed before approving financing. Home inspections are for the benefit of the buyer and typically cost between $200 to over $500 depending on the company and thoroughness of the inspection. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made. Ask me how you can get 50% off your home inspection.


Status Certificate (For Condominiums)

Prior to buying a condo, you should request a Status Certificate. This document provides detail on the Condo Bylaws, Rules and Regulations, as well as Finances. Any Insuite restrictions or common element restrictions are also detailed in the Status Certificate. Most importantly, it includes information on the condo's Reserve Fund, which is the amount the condo corporation has set aside to cover unexpected expenses. The Status Certificate is usually paid for by the seller and is approximately $100.


CMHC Insurance Premium

This premium is only applicable if you are putting less than 20% of the purchase price as a downpayment. Additionally, you have the option of adding the premium to your mortgage and amortizing it over the term of your mortgage. If your mortgage is CMHC or GE Capital insured (less than 25% down payment), there is P.S.T. of 8% in Ontario, payable at closing, on the CMHC or GE Capital fee. While the insurance premium can be added to the mortgage amount, the P.S.T. must be paid at closing. For example, a mortgage that results in a $1,000 fee, will have to pay $80 in PST upon closing.


New Home Warranty

In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.


High Ratio Mortgage application fee

Paid to the mortgage insurer to process your application if you're applying for a high-ratio mortgage (less than 20% down payment).Mortgage default insuranceHigh-ratio mortgages (those with less than 20% down payment) require insurance against default. The cost is usually added to the mortgage, and ranges from 1.00% to 3.25% depending on the amount of your down payment. There is an additional 0.25% premium for variable rate mortgages.


GST

You pay GST on the purchase price of a newly constructed home. On the purchase of a newly constructed home, GST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say "Plus GST" or "GST Included", and who gets the GST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees).


Moving expenses

Costs will vary, depending on whether you do it yourself, rent a truck, or hire professional movers.


Additional expense

These could include utility hook-up charges, any repairs you need to make after buying your home, the cost of appliances and window and floor coverings.