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Closing Costs

Besides the actual cost of the home there are a number of other costs which you may have to pay when you buy a home.

Some closing costs to consider.

  • High Ratio Mortgage Insurance Premium and PST. If your down payment is less than 20% of the purchase price then you will have to pay insurance. The premium, less the Provincial Sales Tax, can be added to your mortgage. The PST must be paid at closing.
  • Appraisal Fee. independent appraiser are often hired by your mortgage provider to determine the value of the property before they advance you money for a mortgage.
  • Down Payment. The portion of the purchase price that you put down when you make your offer to the seller, or shortly thereafter. This is included in the purchase price, but you have to have this money before you can buy.
  • Bridge Financing If your home purchase closes before the sale of your current home, you'll need to finance the cost of the home purchase for a short period of time.
  • Status Certificates for Condos When purchasing a condo it is usual to look at the Status certificate to assess the condo corporation's finance, its legal state and if there are any special assessments or problems with the condo.
  • Interest Adjustment Costs. Your Mortgage provider expect the first mortgage payment one month after closing. If you close mid-month, some lenders expect the first payment, or sometimes the intererst accrued during that time period, at the beginning of the next month. This is two weeks before you would expect your first payment due. When arranging your mortgage, ask how interest is collected to the interest adjustment date.
  • Legal Fees and Disbursements. You normally retain a lawyer to act for you in the purchase of the property, and you will be responsible for payment of all related fees and disbursements. Fees for these services may vary significantly, so ask a lawyer what he expects the fees will add up to before you commit.
  • Property Survey is usually required before a property deal closes. Often the seller will provide a copy since they often have one dating from their purchase. Ensure that this certificate reflects improvements. If outdated or missing, the offer to purchase should indicate whether the seller or buyer will pay to obtain the new survey.
  • Title Insurance. is an insurance policy that protects you, from problems related to the title to your home. Most lawyers will charge more if you decline to pay for home insurance. It is usually better to pay for insurance.
  • Land Transfer Tax is a one-time tax based on a percentage of the purchase price of the property. In Toronto, there is a Provincial and a Municipal portion. Nick Boothby offers this calculator help you estimate land transfer tax.
  • Property Insurance. Your mortgage lender will require you to provide proof of insurance before they will lend you money. See Nick Boothby's article on insurance and problems that can occur in obtaining insurance.
  • Property Tax and Utility Bill Adjustments. The purchase price of a resale home is always payable "subject to the usual adjustments" at closing. The seller is responsible for these costs until closing day. Closing day onwards is the responsibility of the buyer. Often the seller will have paid taxes ahead (or will have some part left to pay). Similarly the seller might have paid for or owe on utility bills. It is the responsibility of the lawyers to determine the adjustments. These are then added or subtracted from the purchase price the buyer has to pay.
  • Township/Municipality Levies (applicable to new homes within subdivisions). For such items as tree planting, school taxes and other items until they are assumed by the town/municipality. Inquire before you buy.

This list is not all inclusive. You might have to pay other costs not listed and some of the above costs might not apply to your case. Inquire and be prepared.

Other costs not related to closing such as home inspection, moving costs, or repairs / renovations necessary before you can move in need to be considered as well. Canadian Mortgage and Housing Corporation has prepared a handy calculator to help you estimate your costs.

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