What you can expect for closing costs in a typical, residential real estate purchase.

It is important to be aware of all the costs involved in buying a home. It is prudent for a home buyer to know these costs before you go house hunting. Knowing what additional “closing costs” are, over and above the down payment will help you plan for a smooth purchase and help you avoid unpleasant surprises. Most lenders recommend you should allow at least 1.5%  to 2% of the purchase to be on the safe side.
 
The list below is a good guideline of closings costs that you might incur but always verify these for your particular situation.

Legal Fee 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., plus H.S.T. The actual fee that the lawyer will charge will depend entirely upon the deal between you and your lawyer. Be sure to ascertain exactly what this will amount to in a worst-case situation. Typical legal fees for a purchase with a mortgage  range between $1,000 to $1,500 including disbursements. We recommend you call one or two lawyers and obtain a quote directly from them including both their fee and estimates of disbursements.

Ontario Land Transfer Tax (LTT)

The Province of Ontario levees land transfer tax that is charged on closing when the property is transferred to your name. The amount varies on the price of the home, whether or not you are a first time home buyer and which city you live in Ontario, Canada.

Mortgage Insurance

Budget for insurance on your new home. Insurance costs may include Mortgage Default insurance, homeowners insurance, mortgage life and disability insurance and title insurance.

Property Tax and Prepaid Utilities Adjustments

At the time of a sale, the lawyer for the buyer will confirm that property taxes are paid up to date. If they are, a Tax Certificate is issued, from which any adjustments are made - usually requiring the buyer to compensate the seller for any prepaid taxes. If they are not up to date, the municipality requires that the seller pay them off from the proceeds of the sale. If the current owner has prepaid property taxes or other utilities for the year, they will be credited the prepaid portion on closing by the purchaser. Your lawyer will confirm this for you.

Property Appraisal

If your lender requires an appraisal report to be completed, it will be done before advancing any mortgage funds. Lenders want to be assured that the property is worth what you are either paying for it, or valuing it for. The cost for an appraisal normally ranges between $250 and $450 depending upon the property, location and type of appraisal.

Home Inspection

A home inspection report is commissioned by the purchaser to evaluate the physical condition of a property and it's mechanical components prior to the "firming up" of a Real Estate transaction. The scope and detail may vary, but most reports indicate specific issues and cost to repair. Depending on the size and location of the property, a home inspection is around $500.

Interest Adjustment (IA)

Depending on what day of the month you arrange to make your mortgage payments and when your transaction closes, your lender may charge you interest on closing up to the first payment date. This is called the Interest Adjustment Date (IAD). Your mortgage agent will calculate this for you. Remember, that all mortgages are paid in arrears so if your possession date is June 1st, and you choose to pay monthly, then your first payment will be July 1st.

Always consult a professional in your initial planning and before committing yourself to one of the largest purchase transactions you'll make. I'm always available to answer your questions. - Steven Porter, Mortgage Agent - Mortgage Architects steven.poretr@mtgarc.ca or 1-905-875-2582