You have saved enough for a down payment, found your perfect home, negotiated the purchase price and made an offer subject to financing, and have now gotten approved! You’re all set, the hard part is done, right? Not in reality, there are quite few other fees that need to be considered – closing costs.
Closing costs are often hidden and often overlooked one time expenses due on the completion date. A rule of thumb is to budget 1.5% to 4% of the purchase price to cover closing costs. However, other factor such as taxes, the type of home, or if it’s a new build can impact the amount you need to account.
Some fees that you are fairly guarantee to face:
- Legal Fees: Your lawyer will explain all of the paperwork and make sure what you are signing is binding, legitimate, and all items agreed to have been met. In addition, you are liable to repay the lawyer for any searches, registrations, and incidentals – all due on the closing day.
- Title Insurance: Most lenders will require title insurance as a condition to their mortgage, which protects from fraud, identity theft and forgery, municipal work orders, zoning violations and other property defects.
- Fire/Home Insurance: Lenders also require fire/home insurance in place by the time of purchase completion, which covers replacement cost of the home.
- Adjustments: When possession takes place mid month, and the seller has already paid fees such as taxes, utilities, and strata. So, the amount you owe is based on the portion of that month you will have possession and prorated on the date of completion.
- Property Transfer Tax: First time home buyers are exempt if purchasing property under $500,000 and all home buyers are exempt if they are purchasing new property under $750,000. Property Transfer Tax is calculated as 1% on the first $200,000, 2% over $200,000 and 3% on any value over $2,000,000.
- GST: Is not charged if someone has previously lived in the home, but charged on all new home purchases.
This list is not extensive, as each purchase has its own set of costs. As your broker, I make sure to explain each one and assure you are fiscally prepared.