Closing costs are expenses you pay to close a property purchase and sale. As the buyer, your closing costs include land transfer tax, legal fees and any costs the lawyer pays on your behalf, such as title insurance, survey costs, courier charges, among others. The seller's closing costs include real estate commission (if applicable), legal fees and any costs their lawyer pays on the seller's behalf.
You’re pre-approved for a mortgage to help you find the home of your dreams. Then, you hand over your down payment, collect your mortgage funds, pay the seller and get the keys, right? Not so fast. There are other costs to consider. These closing costs and additional expenses can impact your offer, the size of your down payment and the amount of mortgage you qualify for. Only a few are optional, so be aware of these costs from the start.
๐๐๐๐จ๐ซ๐ ๐๐ฅ๐จ๐ฌ๐ข๐ง๐ ๐๐๐ฒ
Once you find a property, you need to know everything about the home — good and bad. Inspections and surveys can uncover issues that could impact the purchase price, or slow or stall the sale. These reports are optional, but can help save you money in the long run.
๐๐จ๐ฆ๐ ๐ข๐ง๐ฌ๐ฉ๐๐๐ญ๐ข๐จ๐ง (๐จ๐ฉ๐ญ๐ข๐จ๐ง๐๐ฅ)
Before you make an offer on a property, get a home inspection. A home inspector checks that everything in the home is in good working order. If a roof needs repairs, you want to know about it right away. A home inspection helps you make a more informed decision about buying a home. At this point, you can walk away and not look back.
๐๐ซ๐จ๐ฉ๐๐ซ๐ญ๐ฒ ๐๐ฉ๐ฉ๐ซ๐๐ข๐ฌ๐๐ฅ
When you apply for a mortgage, your lender may order an appraisal to get an estimate of the property's value. You may need one for financing purposes, so factor this into your closing costs.
๐๐ซ๐จ๐ฉ๐๐ซ๐ญ๐ฒ ๐ฌ๐ฎ๐ซ๐ฏ๐๐ฒ
A survey outlines property boundaries and identifies setbacks, buildings or other restrictions that can impact the property’s value, such as overhanging structures or shared driveways. Your lender might ask for an up-to-date survey when you apply for a mortgage. Sellers sometimes have one they can give you. If not, you can hire a professional land surveyor to do the job.
๐๐ข๐ญ๐ฅ๐ ๐ข๐ง๐ฌ๐ฎ๐ซ๐๐ง๐๐
Your lawyer may encourage you to buy an owner's title insurance policy. In some cases, your lender may require a lender's title insurance policy, which is generally at your expense. These title insurance policies protect you and the lender from title fraud, municipal work orders, zoning violations and other property defects. The lawyer usually adds title insurance costs to your legal bill.
๐๐ซ๐จ๐ฉ๐๐ซ๐ญ๐ฒ ๐ข๐ง๐ฌ๐ฎ๐ซ๐๐ง๐๐
Property insurance protects you in case of fire and certain other disasters. Your lender requires you arrange property insurance for your home's replacement value. The insurance must be in place before your lender advances the mortgage funds.
๐๐จ๐ซ๐ญ๐ ๐๐ ๐ ๐ฅ๐ข๐๐, ๐๐ซ๐ข๐ญ๐ข๐๐๐ฅ ๐ข๐ฅ๐ฅ๐ง๐๐ฌ๐ฌ, ๐๐ข๐ฌ๐๐๐ข๐ฅ๐ข๐ญ๐ฒ ๐จ๐ซ ๐ฃ๐จ๐ ๐ฅ๐จ๐ฌ๐ฌ ๐ข๐ง๐ฌ๐ฎ๐ซ๐๐ง๐๐ (๐จ๐ฉ๐ญ๐ข๐จ๐ง๐๐ฅ)
Unexpected health or employment changes can affect your income and your ability to afford your home. So, consider applying for insurance when you set up your mortgage. There are several options that can help protect you and your family's financial future if you’re diagnosed with a critical illness, pass away, lose your job or become unable to work due to a disability.
๐๐ฅ๐จ๐ฌ๐ข๐ง๐ ๐๐๐ฒ
You may pay fees, taxes and mortgage default insurance when the purchase of your new home closes. You're near the end of your journey. These are some of the final costs between you and your new home.
๐๐ฉ๐ฉ๐ฅ๐ข๐๐๐๐ฅ๐ ๐๐๐๐ฌ, ๐ญ๐๐ฑ๐๐ฌ ๐๐ง๐ ๐ซ๐๐ฆ๐๐ข๐ง๐ข๐ง๐ ๐๐จ๐ฌ๐ญ๐ฌ
Like any other purchase, the government may charge tax. When you buy a home, you pay the following costs:
- ๐ณ๐๐๐ ๐๐๐๐๐๐๐๐ ๐๐๐. The government may charge land transfer tax when you buy a property. The tax is based on the home’s purchase price, and sometimes other factors. Most provinces charge provincial land transfer tax, but some cities charge their own municipal land transfer tax, too. Taxes vary by province and first-time home buyers may sometimes receive a rebate for part of the cost.
- ๐ฎ๐บ๐ป ๐๐ ๐ฏ๐บ๐ป. Newly constructed and substantially renovated homes may be subject to GST or HST. If you pay GST and HST, you may qualify for a new housing rebate.
- ๐ท๐๐๐๐๐๐๐ ๐๐๐๐๐, ๐๐๐๐๐๐๐๐๐ ๐๐๐ ๐๐๐๐ ๐ ๐๐๐๐. The seller may have prepaid property taxes, utility bills or condo fees before you take ownership of the property. You reimburse the seller for the portion of the costs from the closing date forward.
๐๐จ๐ซ๐ญ๐ ๐๐ ๐ ๐๐๐๐๐ฎ๐ฅ๐ญ ๐ข๐ง๐ฌ๐ฎ๐ซ๐๐ง๐๐
You need mortgage default insurance if you have less than 20% down payment. If your down payment is less, lenders usually add the premium to your mortgage. The more risk involved, the higher the premium. Depending on where you live, you may also pay provincial sales tax on the premium.
๐๐๐ญ๐๐ซ ๐๐ฅ๐จ๐ฌ๐ข๐ง๐ ๐๐๐ฒ
The home is yours. When the sale has closed, your lawyer sends you a transaction report. It includes copies of all relevant legal papers.
๐๐๐ ๐๐ฅ ๐๐๐๐ฌ ๐๐ง๐ ๐๐ข๐ฌ๐๐ฎ๐ซ๐ฌ๐๐ฆ๐๐ง๐ญ๐ฌ
Your lawyer's legal fees and disbursements are considered closing costs. Disbursements include any expenses your lawyer had to pay for work on your behalf. Fees vary by province and municipality and may be subject to GST or HST.
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