Understanding Closing Costs

There are several items that need to be attended to prior to closing a home purchase transaction. These include certain items imposed by the government, certain items that lending institution require as well as certain items that should be attended to in order to ensure clear title to the home or condo that you buy. In general, we ask our clients to budget 1.5% to 2% of the purchase price of the home or condo to cover these various items. While these vary depending on the situation, typical costs include:

Survey

In most cases, the agreement of purchase and sale will have a clause asking for the vendor to provide a survey to the purchaser at their cost within a certain period of time. If the vendor does not provide you with an acceptable survey, you may need to obtain a new survey. Approximate cost: $200 TO $500. In most cases however, the survey is provided by the vendor.

Title Insurance 

A title insurance policy can eliminate the requirement for a new survey. Title insurance is an insured statement of the condition of title or ownership of real property, at the time the policy is issued. Approximate cost: $250-275 (residential).

Land Transfer Tax

The Land Transfer Tax is payable on almost all purchases. The tax is calculated on the purchase price of a home according to a specific formula. Land Transfer Tax is normally waived for First Time Home Buyer's.

Legal Fees 

Legal fees will vary according to the lawyer. Approximate cost: $600 to $800 Disbursements.

Disbursements 

Disbursements are costs that you lawyer will have to pay on your behalf, such as registration fees, photocopies, etc. Approximate cost: $150 to $600.

Statement of Adjustments

The purchaser and the vendor are each responsible for their share of taxes, fuel, and utilities. These costs will be reflected in the statement of adjustments which the lawyer puts together. Approximate cost: Varies depending on type of property (condo vs. freehold) and time of year. 

Home Insurance 

Home insurance premiums will vary from one insurance company to another and according to your insurance needs. In a condominium, the building insurance is included in your maintenance fees and does not form part of the closing costs, unlike a house purchase. Approximate cost: Varies

Mortgage Appraisal

Approximate cost: $225. This may be waived depending on how you negotiate.

Home Inspection

Prior to buying a home, you should have a home inspection performed to identify any significant structural, electrical or plumbing problems with the home. Some lending institutions require that you have a home inspection completed before approving financing. Approximate cost: $200 - $450 plus tax.

Status Certificate

Prior to buying a condo, you should request a Status Certificate. This document provides detail on the Condo Bylaws, Rules and Regulations, as well as Finances. Any Insuite restrictions or common element restrictions are also detailed in the Status Certificate. Most importantly, it includes information on the condo's Reserve Fund, which is the amount the condo corporation has set aside to cover unexpected expenses. The Status Certificate is usually paid for by the seller. Approximate cost: $100.

CMHC Insurance Premium

This premium is only applicable if you are putting less than 20% of the purchase price as a down payment. Additionally, you have the option of adding the premium to your mortgage and amortizing it over the term of your mortgage. In the latter case, it does not form part of your closing costs as you will pay it over the term of the mortgage.