There are a number of expenses that are related to finalizing and closing the purchase of a new home. Most of these additional expenses are paid immediately before the actual closing day through a real estate lawyer’s office. It is not possible to estimate exactly what closing costs will be because no two transactions are identical. Other factors, such as adjustments will also impact the final closing costs. However, we can provide some general guidelines.
A real estate lawyer will be able to provide an estimate regarding the costs involved to close a specific purchase. In most cases, the exact amount will not be available until a couple of days prior to the actual closing because of adjustments, but a lawyer can provide an estimate. Below is an outline of a typical estimate. Please note that some costs vary based on your purchase price, notably Title Insurance and Land Transfer Tax. The estimates below are based on a $500,000 purchase price.
|•||Legal fees (include mortgage)||$ 825.00|
|•||HST on legal fee, title search, tax Certificate, disbursements||500.00|
|•||Register deed & mortgage||145.00|
|•||Land Transfer Tax (not Toronto)||$6,475.00|
Please note that this example does not include any adjustments. An adjustment is an expense that the seller has paid and their payment covers the time period after the house closes. Property taxes and condo maintenance fees are typical adjustments. These will be pro-rated on a daily basis and credited or debited to the seller or buyer as applicable. Also, please note that this example does not include any “First Time Buyer” rebates or additional Land Transfer Tax payable in Toronto.
Most lenders will require that buyers show proof that they have 1.5% of the purchase price available for closing costs. In reality, 1.75%-2% is a better estimate when calculating closing costs. Because Land Transfer Tax is the largest portion of closing costs and is totally dependent on the purchase price, as the price increases, closing costs will increase dramatically. A sales representative will help you plan accordingly.
There are also expenses related to the purchase of a home that are paid to professionals other than the lawyer. They include:
Home Inspection – starting at approximately $400 – paid to the inspector during the conditional period of the transaction which is typically the week after you actually negotiate the purchase. The cost of the inspection varies dependent on several factors including square footage, age of home, etc. For example, if it is an older home, the cost may be higher, because there are more complex issues to examine such as wiring and insulation. Very often homes in rural or estate subdivisions do not have municipal water and sewage, so additional inspections must be initiated on the septic system and well. All of these issues will impact the cost of the inspection. However, a sales representative will be able to give you an accurate estimate of the cost of the home inspection and any ancilliary inspections once you have made a decision regarding the home you wish to purchase.
Property Insurance – this is totally dependent on the home, the insurer, and coverages. Age of the home, square footage and age of the systems (such as roof and furnace) will also impact the cost. This should be arranged immediately after your purchase. In some cases, where the sales representative believes there is something in the home that may be an insurance “red flag” such as knob and tube wiring, the offer may be conditional on securing satisfactory insurance coverage. In that instance, insurance coverage should be arranged during the conditional period.
Moving Expenses – again, totally dependent on how you choose to move – rent a truck, hire movers, etc.
Contact an Avenue Realty Inc., Brokerage Realtor to learn how we can help.