Closing costs are the costs that are presented to you on your home’s closing date. Most people are amazed to learn that there are extra costs that have to be paid and added to the price of the home. In addition to paying a down payment, most homeowners in Canada must pay about 1.5% of the purchase price for closing costs. This is an estimate provided by Genworth Financial and CMHC, however these costs could be different depending on where the homeowner resides.
Below is a breakdown of the closing costs that are normally presented to at the time of closing. Understand that you will most likely see many of these on your closing day. However, it is advised that you speak with your attorney in order to determine which costs pertain specifically to you:
- Home Inspection Fee for Resale Homes. This is usually a requirement with the resale of homes. Every inch of the home is professionally inspected. This inspection is done so that the buyer knows the value of the property. This fee can cost a home buyer anywhere in the range of $300 to $400. It is advised that the buyer only hires a home inspector that has liability insurance. This is a form of protection, just in case the inspector overlooks something important during the inspection.
- Appraisal Fee for New Homes. This is a fee that is usually a requirement for the sale of new homes in Canada. This fee helps the lender to determine the market value of the property. The homeowner has to pay this amount, and it could range anywhere from $100 to $300.
- Fire Insurance: Your lender will require that there is fire insurance on the home from the moment that you first take ownership. The amount insured is usually the same amount as the home’s price, or the amount that it will take to replace the home if something were to happen. The actual amount will depend on the amount of the property being insured, the type of coverage, the insurance company and where the home is located. Expect to pay about $250 to $600 each year for fire insurance.
- Provincial Sales Tax on Mortgage Insurance. CMHC and Genworth Financial will require you to pay taxes on the insurance premium at the time of closing. Usually you can add the insurance premium to your mortgage, however; the tax cannot be added to the mortgage.
- Land Survey Fee. Most mortgage lenders want to have a copy of the latest land survey on file. If one does not exist, the homeowner has to pay to have one done, and this cost can be anywhere in the range of $600 to $900. However, a lot of lenders will usually allow title insurance instead, and this is much affordable.
- Legal Costs and Disbursements. Attorneys and notaries have to prepare the mortgage, draft the title deed and conduct numerous searches. They will charge for their services. They also have to charge for their out of pocket costs such as supplies, searches and registrations.
- Land Transfer Tax. A majority of the provinces in Canada will charge a land transfer tax, and it must be paid by the home buyer. The amount of this tax depends on where the property is located. This tax is determined by the amount of the purchase cost. Many times first time home buyers or anyone who is purchasing a resale home may be able to get a refund of this tax.
- New Home Warranty. Most new homes in Canadian provinces have coverage via a new home warranty program. The purchaser has to pay exactly $600 for this coverage. If the builder does not meet his responsibilities, the program will finish building the home or make the appropriate repairs up to a maximum amount. For additional info on the Ontario new home warranty, please visit https://www.tarion.com.
- HST. HST is a Canadian Consumption tax, and it only has to be paid on new homes. Always establish if you or the builder is going to pay this tax. When making an offer on the home, it must specify “Plus HST” or “HST Included.” It also has to specify who will receive HST rebates, if applicable. A majority of the home builders in Canada include this cost in the purchase price so that you don’t have to pay it at closing.
- Closing Adjustments. These costs are estimates for the things that the seller had to pay up front such as utility bills, property taxes and other incidentals. After the home has been closed, the home buyer must pay these bills. Your attorney will advise you about these fees once all searches have been done.