Knowing The Facts: Closing Costs

If you’ve ever bought or sold a home, you’re probably familiar with the concept of closing costs – fees deducted at the end of a real estate transaction just prior to closing. These fees differ for buyers and sellers, making it important to educate yourself and avoid any “hidden surprises” upon closing!

Below are some of the most common closing costs that homeowners will come across:

• Land Transfer Tax

Most provinces and major cities levy this tax – it is represented as a percentage of the purchase price. In Ontario, it is structured as follows:

$0 - $55,000: 0.5% of the purchase price
> $55,000 - $250,000: 1% of the purchase price
> $250,000 - $400,000: 1.5% of the purchase price
> $400,000:  2% of the purchase price

As mentioned, larger cities like the City of Toronto also require the payment of a Municipal Land Transfer Tax, structured similarly to the aforementioned. For a complete calculation, visit my Land Transfer Tax Calculator here.

• Mortgage Costs

These costs vary by lender, but may include a mortgage appraisal or application fee and mortgage insurance in case of default. This cost is represented as a percentage of the purchase price and is relative to the size of your down payment. My Mortgage Calculator will help you get a better understanding of the associated costs involved.

• Adjustment Costs

If you are purchasing a home in the middle of a bill cycle, your lawyer will need to calculate adjustment costs. They are typically prepaid by the seller and include (but are not limited to): property taxes, utility bills, property maintenance and any other services that are billed regularly. 

• Legal Fees

Legal fees cover the cost of lawyers . For Buyers, this includes a title search (to prevent fraud and any other outstanding liens against the property), registering the deed and mortgage, as well as any other associated checks on the property.  For sellers, they are responsible for discharging the mortgage, title and disbursing any other monies to the appropriate parties.

• Title Insurance

Ever fallen victim to identity theft?  Hopefully not.  Although Title insurance is not mandatory, it protects you against any fraud associated with the title of your home – a highly recommended investment.

• Home Insurance

This cost protects the home against unfortunate circumstances, the contents within the home and any accidents that may occur within it. Some lenders may not release funds without record of home insurance being obtained, so it may be in your best interests to get it. Better safe than sorry!

• Real Estate Fees              

Real Estate fees cover many services provided by your Realtor throughout the purchase and sale of a home.  They are borne by the seller, and are included as part of the sale price. Most fees are represented as a percentage and are negotiated prior to a property being listed.

• Mortgage Discharge

If you end your mortgage prior to its completion, your lender may levy a discharge fee upon its termination. These rates vary by lender, but are important to keep in mind while listing your home.

Want to know how much your home is worth? Begin the process of home ownership? Call me today!