Closing Costs & Others Associated With Your Home Purchase
Closing costs are a list of charges in addition to the purchase price of the home. Your lawyer presents to you a list of extra fees on the closing date of your home. Many people are surprised at the additional costs over and above the price of the home. According to the CMHC and Genworth Financial you should budget yourself for at least 1.5% of the purchase price for closing costs in addition to the down payment (have around 2.5% to be on the safe side). The costs vary among provinces and cities. Below you will find a brief explanation of these costs for the Windsor Essex Real Estate market and can be used as a general guide for Ontario closing costs. Please note these are some of the closing costs you may encounter depending on your specific situation. Use this as a guideline then speak to your lawyer who can provide a more accurate estimate for your situation.
Home Inspection Fee Generally Required with Resale Homes
I highly recommend a professional inspection of the home you are looking at purchsing, it is for the benefit of the buyer and will give you peace of mind. A home inspection can cost anywhere from $300 - $400 and is well worth the investment. When hiring a home inspector it is important that the inspector is reputable and has liability insurance just in case they overlook something.
Provincial Sales Tax on Mortgage Insurance
If your mortgage is insured, with 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.
What is CMHC Mortgage Loan Insurance?
Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment. To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments. Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.
Mortgage lenders require a certificate of insurance to be in place from the time 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, amount of coverage, the insurance company and the municipality. The cost can vary anywhere from $250- + annually for most properties.
Appraisal Fee Generally Required with New Homes
An appraisal provides the lending institution with a professional opinion of the market value of the property This cost is normally the responsibility of the homeowner and it can cost between $100 - $300.
Land Survey Fee or Title Insurance Fee
A recent survey of the property is usually required by lenders. If one is not available the cost can range between $600 - $1100 for a new survey. In lieu of the survey most lenders today will accept title insurance which can cost quite a bit less.
Legal Costs and Disbursements
Lawyers and notaries charge fees for their services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. Disbursements are out-of-pocket expenses incurred during the process such as registrations, searches, and supplies.
Land Transfer Tax
Most provinces charge a land transfer tax payable by the purchaser. The amount varies depending on the province. Land transfer tax is based on the purchase price. First time home buyers purchasing a new or re-sale home may be entitled to a refund.
New Home Warranty ( TARION in Ontario)
In most 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 to a maximum amount. For more information on Ontario new home warranty visit http://www.tarion.com.
HST is payable on the purchase of a newly constructed homes only. If you are purchasing a new home make sure you know who pays the HST, it will be either you or the builder. The purchase agreement or offer should indicate "Plus HST" or "HST Included" and who gets any HST rebates if there are any. Many builders have included this cost into the purchase price so the buyer does not have to come up with it at closing.
Your lawyer will outline the closing adjustments for bills the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the responsibility of the purchaser. Your lawyer will let you know what they are once the various searches have been completed.