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Closing costs are a list of charges your lawyer presents to you
on the closing date of your home.Many people are surprised at
the additional costs over and above the price of the
home.According to the CMHC and GE Capital you should have at
least 1.5% of the purchase price for closing costs in addition
to the down payment (I suggest around 2% 2.5% to be on the safe
side).The costs vary among provinces and cities.
Below youll find an example and a brief explanation of these
costs.Please note these are some of the closing costs you may
encounter depending on your specific situation.Use this as a
guideline then talk with your lawyer who can provide a more
realistic estimate for your situation.
Closing Costs Example
Purchase Price: $275 000.00
Down Payment:$13750.00
CMHC Premium: $9796.88
Principle:$271 046.88
CMHC Premium is based on 5% down.The rates may vary depending on
when you decide to purchase.
Closing Costs
PST on CMHC Premium: $783.75
Land Transfer Tax: $2600.00
CMHC Application: $165.00
Home Inspection: $250.00
Appraisal Fee: $300.00
Legal Costs: $1070.00
Title Insurance: $250.00
Closing Adjustments: $250.00+
Home & Fire Insurance: $40/ mo. or $480/ yr.
Interest Adjustments* $Depends on closing date
Hydro New Account: $300.00
Estoppel Certificate Fee*** : $100.00
Est. Total: $6148.75
*** Only applies to condos
This doesnt include other costs like cable, phone set-up fees or
your moving costs.This is why I would recommend having at least
2 2.5% cash in your bank to cover closing costs.Youll notice the
numbers Ive provided here work out to just under 2.5% of the
purchase price.
Also if the seller paid his/ her taxes for the year in one lump
payment in February and you move in June then you will have to
pay the seller the remaining taxes for the year because they
pre-paid.
*Most mortgage companies make your monthly payments due on the
1st of the month or the 1st and 15th if youre on bi-weekly
payments.If you move in on the 20th of the month the bank will
calculate the interest from the 20th of the month to the end of
the month and either bill you on closing or including it in your
first mortgage payment.
**If youve never had to pay hydro to Embridge directly they will
want a approx. 200 deposit which they hold for one year then
apply it as a credit to your account.
Appraisal Fee Generally done with new homes
The appraisal provides the lender with a professional opinion of
the market value of the property.This cost is normally the
borrowers responsibility and it can range between $100 to $300
plus GST.Sometimes the costs may be higher for larger,
custom-built homes or homes in a remote area.
Home Inspection Fee Generally done with resale homes
A professional inspection of the home, top to bottom is for the
benefit of the buyer.A typical home inspection can cost anywhere
from $300- $400, and is well worth the investment. If the home
is older then 5 years a home inspection is a must for
buyers.When hiring a home inspector, make sure the inspector has
liability insurance, just in case a mistake is made.
Fire Insurance
All mortgage lenders require a certificate of fire insurance to
be in place from the time you take possession of the home. The
amount required is generally 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.The cost can vary anywhere from $250-$600
for most properties.
Provincial Sales Tax 8%
If your mortgage is CMHC or GE Capital insured (less than 25%
down payment), there is P.S.T. of 8% in Ontario, payable at
closing, on the CMHC or GE Capital fee. While the insurance
premium can be added to the mortgage amount, the P.S.T. must be
paid at closing. For example, a mortgage that results in a
$1,000 fee, will have to pay $80 in PST upon closing.
Land Survey Fee or Title Insurance Fee
A recent Survey of the property is usually required by the
lender, and if one is not available, it normally costs anywhere
from $600-$900 for a new survey. In lieu of the Survey, most
lenders today will accept Title Insurance, at a much lower price
of approximately $250.
Legal Costs and Disbursements
A lawyer or notary will charge a fee for their professional
services involved in drafting the title deed, preparing the
mortgage, and conducting the various searches. The
disbursements, on the other hand, are out-of-pocket expenses
incurred, such as registrations, searches, supplies, etc., plus
G.S.T.
Land Transfer Tax
Most provinces charge a land transfer tax, payable by the
purchaser, and the amount varies from province to province. This
tax is based on the purchase price (refer to mortgage ABC's for
exact calculation). In Ontario, first time home buyers who
purchase a new home get a refund up to $1725. Click here for
more information on Land Transfer Tax.
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 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 a high-ratio insured mortgage (mortgages above 75% of the
purchase price), the mortgage insurer (CMHC or GE Capital)
charges a fee of $165-$185 for applying and processing the file,
as well as appraising the property. On new homes, this fee drops
to $75.
Closing Adjustments
An estimate should be made for 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/notary will let you
know what they are exactly once the various searches have been
completed.
G.S.T.
On the purchase of a newly constructed home, GST is payable, but
make sure you know who pays this, you or the builder. Therefore,
on the offer, the purchase price will say "Plus GST" or "GST
Included", and who gets the GST new home rebate. A lot of
builders have included this cost into the purchase price so that
the buyer does not have to come up with that at closing. (As
well, this tax is also charged on all professional fees).
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