When purchasing a home, many buyers have their down payment plan well-prepared, but they often forget about the additional costs involved. I will guide you through these closing costs in detail!
Closing costs are one-time expenses related to the home purchase, separate from the down payment or deposit you paid when buying the home. Typically, these costs range from 1.5% to 4% of the purchase price, depending on the location and price of the property. First-time homebuyers can take advantage of first-time buyer benefits, which can reduce the land transfer tax, so you will need less preparation compared to non-first-time buyers.
Land Transfer Tax (LTT): This is calculated as a percentage of the home purchase price, and the amount varies by province. In cities like Toronto, an additional municipal land transfer tax may apply. First-time homebuyers can get a rebate ranging from $4,000 to $8,800 for land transfer tax.
Legal Fees: There will be legal fees of about $2,000 to $3,000 for preparing official documents such as title transfers and mortgage registrations.
Provincial Tax on CMHC Insurance: If you use a down payment of less than 20% and get an insured mortgage, the CMHC insurance itself is covered by the mortgage, but the HST on the insurance must be paid to the lawyer and may sometimes be deducted from the loan amount.
Home Inspection Costs: It is strongly recommended to conduct a home inspection before closing to prevent future issues. The cost is typically around $500.
Appraisal Fees: An appraisal is performed to verify the resale value of the home in case of mortgage default. The cost is usually around $300, and sometimes it is covered during bank promotions.
Home Insurance: Home insurance covers the cost of replacing the home and its contents. It must be in place before the closing date and is paid on a monthly or annual basis.
Utilities: Any utilities such as property taxes or other services paid in advance by the previous homeowner need to be reimbursed.
Property Tax: Property taxes are paid annually and are calculated as a percentage of the home’s value, varying by municipality. If the previous homeowner has already paid the full property tax, you may need to reimburse them for the prorated amount.
By preparing thoroughly, you can ensure a smooth closing process without hidden costs.
