Jeff Tsuji

 
 
 
 
 
GUIDE TO CLOSING COSTS
 
Closing costs are a list of charges your lawyer presents to you on the closing date of your home purchase.  You should have 2.5-4.5% of the purchase price reserved to put towards your closing costs.  Below is a brief explanation of these costs. All of the costs may not apply to your specific situation, but there also may be more which apply to your circumstance.  Please ensure you speak with your lawyer regarding your specific situation.
 
 
Appraisal
The appraisal provides the lender with a professional opinion of the market value of the property.  This cost is normally the borrower’s responsibility and it can range from $100 - $250.  Costs may be higher for larger custom-built homes or homes in a remote area.
 
Closing Adjustments
The buyer and seller are responsible for their share of taxes, fuel, utilities and maintenance fees (condo).  A Statement of Adjustments will be drafted by your lawyer to reflect any amount due.  Costs vary depending on time of year and type of property (freehold vs. condominium).   
*A buyer's responsibility for the property begins on the day of closing.
 
*Deposit*
The Deposit is put towards the purchase price on the home you are buying. Although it is not considered a closing cost, it is a necessary and a very important expense.
 
Fire Insurance
All mortgage lenders require a certificate of fire insurance to be in place from the moment 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, the insurance company and the municipality. 
 
Harmonized Sales Tax
On the purchase of a newly constructed home, HST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say "Plus HST" or "HST Included", and who gets the HST 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 such as Lawyers and Realtor Commissions).
 
Home Inspection – Generally done with resale homes
A professional inspection of the home is for the benefit of the buyer. A typical home inspection can cost anywhere from $400- $600, and is well worth the investment. If the home is older than 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 something is overlooked.  I recommend all buyers be present throughout the inspection process to review first-hand the potential deficiencies found in their desired purchase.
 
Land Survey
A recent Survey of the property is usually required by the lender.  In most cases, the prior owner will provide you with their survey.  If the seller does not provide you with an acceptable survey, you may need to obtain a new survey.  Title insurance (as described below) can take the place of a survey.
 
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 and ranges from 0.5-2% of the purchase price.  (See tables below).  In addition to the provincial land transfer tax, Toronto has an additional tax.
 
Toronto:           A rebate of up to $3,725 applies to first-time purchasers of both new and resale homes in Toronto. This means a full rebate ($3,725.00 max) for first-time buyers of homes valued at $400,000 or less.  
 
Ontario:            A rebate of up to $2,000 applies to first-time purchasers of both new and resale homes in Ontario.  This means a full rebate ($2,000.00 max) for first-time buyers of homes valued at $227,500 or less.  
 
 
                                      Ontario Land Transfer Tax Rates                       Toronto Land Transfer Tax Rates
0.5%
Up to and including $55,000
0.5%
Up to and including $55,000
1%
Exceeds $55,000 up to and including $250,000
1%
Exceeds $55,000 up to and including $400,000
1.5%
Exceeds $250,000 up to and including $400,000
2%
Exceeds $400,000
2%
Exceeds $400,000
 
 
 
 
Legal Costs and Disbursements
A lawyer 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.  Fees depend on each lawyer but can typically range from $900 - $1800 including disbursements
 
Mortgage Application Fee
Find out whether or not your lending institution charges to process your mortgage and/or mortgage insurance application.  In many cases, if you are dealing with a bank that you have other accounts with, they will waive the application fee.
 
Mortgage Loan Insurance & PST
When you purchase a home with less than 20% down, your mortgage must by law be insured.  A mortgage insurance dollar premium will be added to your mortgage balance and will be amortized over the length of your mortgage.  
 
If your mortgage is insured, (CMHC or Genworth Financial), you will be required to pay the applicable taxes on the insurance premium on closing. While the insurance premium can be added to the mortgage amount, the tax must be paid at closing.
 
This table below explains the additional expense incurred.
 
 
Loan to Value
% Premium on Total
Up to and including 65%
0.50%
Up to and including 75%
0.65%
Up to and including 80%
1.00%
Up to and including 85%
1.75%
Up to and including 90%
2.00%
Up to and including 95%
2.75%
 
 
Mortgage Interest for First Month
Most mortgage companies make your monthly payments due on the 1st of the month or the 1st & 15th if you’re on bi-weekly payments.  If you take possession on the 20th, the lending institution will calculate the interest from the 20th of the month to the end of the month and either bill you on closing or include it in your first mortgage payment.
 
Municipal Taxes
If the seller prepaid their property tax for the year in February, and you take possession in June, you will have to reimburse their portion of prepaid taxes for rest of the year.  This will reflect on the Statement of Adjustments.
 
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.  For more information on Ontario new home warranty visit: http://www.tarion.com.
 
Status Certificate (Condominium Only)
The operating guidelines and financial state of the Condominium Corporation are set out in The Status Certificate and Documents.  This package of documents is usually ordered and paid for by the seller at an expense of $100.  If the purchase and sale agreement is not conditional upon status, your real estate agent should put in a clause to have the Seller order the documents at their expense.  Your lawyer will want to review the documents in either case.
 
Title Insurance Fee
Title insurance is an insured statement of the condition of title or ownership of real property, at the time the policy is issued.  In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $300.
 
 
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