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Closing Costs
For Purchasing a Property
Appraisal Fee:
The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower’s responsibility and it ranges as low as $150 for a drive-by appraisal to as much as $350 for a full appraisal. The costs could be slightly higher for custom-built homes, or homes in remote parts.
Home Inspection Fee:
A top to bottom professional inspection of the home can cost the buyer anywhere from $250-$400. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made. Homefund highly recommends to buyers to do a home inspection.
Fire Insurance:
All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. This cost for fire insurance is between $500 and $1500 annually for most homes.
Provincial Sales Tax of 8% (P.S.T.):
If your mortgage is above 80% of the purchase price, by law the lender will need to insure the mortgage. In Ontario there is P.S.T. of 8% payable on the insurance amount. While the insurance premium can be added to the mortgage amount, the P.S.T. must be paid at closing.
Title Insurance Fee:
Title insurance is an insurance policy that protects property owners and their lenders against losses related to the property’s title or ownership. For a one-time fee between $250 and 500, the title insurance policy provide protection from: unknown title defects, existing liens against the property, encroachment issues, title fraud, errors in surveys and public records, etc. Title-related issues can affect your ability to sell, mortgage, or lease your property in the future. There may be some exclusions of coverage, such as known title defects that were revealed to you prior to purchasing the property, environmental hazards, native land claims, matters not listed in public records, and zoning bylaw violations from changes, renovations or additions to property and/or land you are responsible for creating.
Legal Costs & Disbursements:
A lawyer will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. Disbursements are out-of-pocket expenses such as registrations, searches, supplies, etc. Please make sure you discuss these costs with your chosen legal representative.
Land Transfer Tax
(LTT)
Most provinces charge a land transfer tax payable by the purchaser. This tax is based on the purchase price. In Ontario, first time home buyers get an instant credit up to $2000 towards the cost of the tax.
The Ontario land transfer tax (LTT) is a marginal tax and each portion of your home’s value is taxed at a unique rate.
| Purchase price of home |
Marginal tax rate |
First-time home buyer rebate |
|---|---|---|
| First $55,000 | 0.5% | The Ontario first-time home buyer rebate covers the full land transfer tax up to a maximum of $2,000. It is only available to first time home buyers. |
| On $55,000 to $250,000 | 1.0% | |
| On $250,001 to $400,000 | 1.5% | |
| Over $400,001 | 2.0% |
In addition, if you are purchasing a home in Toronto you need to pay the Municipal Land Transfer Tax (MLTT). If you are a first-time homebuyer and if the purchase price is under $400,000, you are exempt from this tax.
The MLTT will be charged on a graduated basis depending on the value of consideration paid for the property.
FOR EXAMPLE: A home with a consideration value of $500,000.01 (excluding GST):
| MLTT Rate | Calculation |
|---|---|
| 0 to $55,000.00 $55,000.01 to $400,000.00 $400,000.01 to $500,000.00 |
55,000.00 x 0.005 = $275.00 $344,999.99 x 0.01 = $3,450.00 $99,999.99 x 0.02 = $2,000.00 |
| Total MLTT= $5,725.00 | |
The Final Fees
New Home Warranty:
In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600-$1000 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.
Mortgage Application and Processing Fee:
On mortgages above 80% of the purchase price, CMHC, Genworth, Canada Guaranty used to charge a fee of $165-$185 for applying and processing the file. However, it’s been a few years since they have waived this fee (for now).
Closing Adjustments:
Closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser’s responsibility. Your lawyer will let you know what they are exactly once the various searches have been completed.
H.S.T.:
On the purchase of a newly constructed home make sure you know who pays H.S.T., you or the builder. On the offer the purchase price will say “Plus HST” or “HST Included”, and who gets the HST new home rebate. A lot of builders have included this cost into the purchase price.
Moving Expense:
You can rent a truck for around $75-100 per day and get friends or family to help with the move. You can also hire professional movers who carry insurance for damaged goods, which can cost several hundred dollars.
Additional Costs:
These include utility hook-ups, any repairs, painting, etc.