CLOSING
COSTS

Closing Costs on a New Property

As you draw closer to moving into the house of your dreams, there are a few costs and fees you should be aware of. Keep in mind that there are many rebates and breaks available for first time home owners that can help alleviate some of these costs. Here is an overview of the fees you’ll need to pay on closing of your new home.

Before your mortgage closes, you may want to pay for a home inspection. It’s highly recommended you do this as a condition of your offer to purchase. This will run you about $500, depending on the complexity of the inspection.

A deposit will also have to be made before your mortgage closes. At minimum, it will need to be 5% of the purchase price, which is the minimum down payment in Canada.

The Land Transfer Tax (LTT) is calculated as a percentage of the purchase price of your home. Refer to the chart below to understand how much LTT will be applied to an Ontario home on purchase. Keep in mind that some municipalities, like Toronto, have their own Municipal Land Transfer Tax.

So for example, if you paid $600,000 for a home, you would pay $275 on the first $55,000 of your home, $1,950 on the next $195,000 value, $2,250 on the next $150,000 and $4,000 on the last $200,000 on the value of your home, for a total of $8,475. This amount will be the same for a Toronto Municipal Land Transfer Tax, for a total of $16,950.

HST

Expect to pay a minimum of $500 plus HST on fees to a real estate lawyer, which accounts for the preparation and recording of official closing documents.

You will pay upfront for the HST on your CHMC Insurance, which is added to your mortgage if you purchase a home with less than a 20% down payment.

TITLE INSURANCE

You will also pay somewhere between $100-$300 for Title Insurance, which is to protect against loss in the event a dispute over property ownership. It can be purchased through your lawyer or a notary.

COSTS RELATED TO SPECIFIC TYPES OF PROPERTIES

There are also a few closing costs that are only incurred if you purchase a specific type of property. For example, if your new home has a septic take, you may need to pay an additional fee to have it inspected to insure it is in working order. This can be negotiated into your offer to purchase as well. If your property has a well, you will want to have the water tested to insure the quality, supply, and potability of the water. These can also be negotiated into the offer to purchase.

When purchasing a condominium or strata unit, you may have to pay for an Estoppel Certificate Fee, which can cost up to $100.

On top of your standard closing fees, there may be additional fees that need to be paid out. This will depend on the agreements of the purchase of the property, and what type of property it is.

WARRANTY FEE

The Home Warranty Enrolment Fee will run you anywhere between $500 and $1,000. It can either be paid up front, or included in your purchase price so it’s absorbed into your mortgage. This is a specific warranty that is offered by new home builders to guarantee their work and protect you from having to pay for repairs due to builder error.

APPRAISAL FEE

A lender may ask for an appraisal fee if you qualify to not pay for CHMC insurance. It just means that they would like to verify the market value of the purchase of the home, and they can give you a list of appraisers they work for, or you can find one for yourself. It will cost you between $150 and $500.

UTILITIES

Don’t forget to hook up your utilities before you move in! You’ll likely have to pay hookup or transfer fees to make sure things like electricity, hydro, gas or oil, and cable, internet, and phone are ready to use when you move in.

PROPERTY TAXES

And if you’re purchasing a property that was previously owned by someone else, you will need to negotiate the payment of pre-paid property taxes. You can calculate the property taxes owed by dividing the annual amount of taxes paid by 365 to get the daily rate, and then multiply that rate by the amount of days left in the taxation year.

As you can see there are several fees that you will need to pay out, but talk to your financial advisor to find you if you might qualify for some additional tax credits to help offset some of these costs.

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