Upon the closing date of your home, your lawyer will present to you a list of charges known as closing costs. These additional costs above and beyond the purchase price of the home can be an unexpected surprise for buyers.
CMHC and Genworth Financial recommend you set aside at least 1.5% to 2.5% of the purchase price for closing costs, in addition to the down payment. Closing costs vary depending on the province, city, and specific situation of your home purchase. In this guide, we explain some of the closing costs you may encounter. Consult with your lawyer for a more detailed estimate for your specific situation.
The lender may require an appraisal of a new build home to better establish the market value of the property. This cost, typically between $100 - $300, is normally the responsibility of the homeowner.
As a buyer, you will benefit from a professional inspection of the home to ensure there are no serious problems lurking beneath the surface. Home inspections usually cost between $300 - $400. Ensure that any home inspector you hire carries liability insurance.
Mortgage lenders require that you have a certificate of fire insurance in place before taking possession of the home. Fire insurance generally covers the mortgage amount or the replacement cost of the home. The cost will vary depending on the location, the insurance company, the amount of coverage, and the property size. The cost for most properties is in the $250 - $600 range annually.
If you carry mortgage insurance (CMHC or Genworth Financial), upon closing you will be required to pay the applicable taxes on the insurance premium. Though the insurance premium is generally added to the mortgage amount, the tax is required at closing.
Lenders usually require a recent survey of the property, although most lenders will now accept title insurance instead, which costs much less. A new survey generally costs between $600 - $900.
Legal costs are fees charged by lawyers and notaries for preparing the mortgage, drafting the title deed, and conducting various searches. Disbursements are various out-of-pocket expenses incurred during the home buying process, including searches, registrations, and supplies.
Like many other provinces, Ontario charges a land transfer tax payable by the buyer upon closing. Land transfer tax is calculated based on the purchase price. First-time home buyers may be eligible for a refund on all or part of the land transfer tax.
In Ontario, new homes are covered by a new home warranty program (Tarion). The purchaser pays approximately $600 for the warranty. If the builder defaults or fails to build the home to an agreed-upon standard, the fund will finish or repair the deficiencies up to a maximum amount. To learn more about Ontario’s new home warranty visit http://www.tarion.com.
HST (Harmonized Sales Tax) is only payable on the purchase of a newly constructed home. If you are purchasing a new home, verify whether it is you or the builder responsible for this tax. On offer, the purchase price will say “HST Included” or “Plus HST” and outline who gets any HST rebates, if applicable. Many builders include this cost in the purchase price, but make sure to confirm.
An estimate should be made for closing adjustment for prepaid expenses by the seller such as property taxes, utility bills, and other charges. After the closing date, any bills are the responsibility of the purchaser. A lawyer will estimate the closing adjustments once the various searches have been completed.