When buying a resale property, it is a good rule of thumb to have 1.5-3% set aside to cover closing costs. The last thing you need on closing day is a surprise bill from your lawyer you can’t cover since you put all your savings into your down payment. Read this first and you’ll be safe!
Costs Before you Close:
- Home Inspection
A home inspection is a crucial part of purchasing a house (and also a good idea for an older condo where equipment is owned by the resident and not the building). An inspection will point out all the deficiencies in the home that need remedied as well will act as a guidebook for future care of your home. Budget for about $600 per inspection.
- Deposit
In Ontario, a deposit is due within 24 hours of an offer being accepted. The generally accepted amount is 5% of the purchase price. In multiple offer scenarios, it is customary to have a bank draft with you at the offer presentation. Have these funds ready in a liquid bank account when you are out shopping for homes so you are ready and able to secure your dream property when you find it.
Costs At Closing:
- Land Transfer Tax
Land transfer tax is paid by the buyer when purchasing a property in Ontario. Toronto has a separate additional land transfer tax payable for any property purchased in its borders (yes this includes Etobicoke, Scarborough and North York). You can use the calculator on our website HERE to find out how much you will owe.
- Legal Fees
It is imperative to have a lawyer represent you in a real estate transaction to ensure all processes with your closing run smoothly. As part of your legal fees, you will want to purchase title insurance to protect you against any issues with title on your future property. Typical legal fees including title insurance will cost about $1,800.
- Adjustments
A statement of adjustments are created by the lawyers of the transaction and outline what has been paid on the property before closing and what needs to be paid in the upcoming months. For example, if the seller has pre-paid the taxes for the year, but you are taking possession October 1st, you will owe the seller the tax amount paid for October 1st to December 31st.
- CMHC Insurance (If Applicable)
In Ontario, if your down payment is less than 20%, you must pay insurance to the Canada Mortgage and Housing Corporation. The amount owing varies depending on your down payment percentage and more information can be found HERE.
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