Dietmar Postelt
Website: dpostelt.com
Phone: 905-853-5955 or 416-229-4835
Dietmar Postelt |
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Closing Costs
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Closing costs are a list of charges your lawyer presents to you 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 CMHC and GE Capital you should have a minimum of at least 1.5% of the purchase price for closing costs in addition to the down payment (I suggest around 2% to 2.5% to be on the safe side).The costs vary among provinces and cities.
Toronto has 2 sets of Land Transfer Tax). York Region only has 1 set of Land Transfer Tax and is much more affordable!
Below you will find an example and a brief explanation of these costs. Please note these are some of the closing costs you may encounter depending on your specific situation. Use this as a guideline then talk with your lawyer who can provide a more detailed estimate for your situation.
Closing Costs Example:
Purchase Price: $350,000.00
Down Payment:$35,000.00 (10%)
CMHC Premium: $9,450.00 (This amount drops substantially if a larger down payment is made)
Principle:$324,450.00
Monthly Payment is only $1888.30 + Tax
CMHC Premium is based on 10% down.The rates may also vary depending on when or where you decide to buy.
PST on CMHC Premium:
Land Transfer Tax: $3725.00 (More if buying in Toronto)
CMHC Application: $175.00+
Home Inspection: $375.00
Appraisal Fee: $275.00
Legal Costs: $1200.00
Title Insurance: $325.00
Closing Adjustments: $350.00+
Home & Fire Insurance: $50/ per month or $600/ year.
Interest Adjustments* $ Depends on closing date
Hydro New Account: $350.00
Estoppel Certificate Fee: $100.00 (If buying a condominium)
Est. Total: $7400.00 (More or Less)
This doesn't include other costs such as cable TV, telephone, any set-up fees or your moving costs.This is why I personally recommend having about 2.5% cash reserve in your bank to cover closing costs. You'll notice the numbers I have provided here work out to just under 2.5% of the purchase price. Also if the seller has paid his/ her taxes for the year in one lump payment in February and you move in June then you will have to pay the seller back the remaining taxes for the year because they were pre-paid.
Most mortgage companies make your monthly payments due on the 1st of the month or the 1st and 15th if you are on bi-weekly payments. If you move in on the 20th of the month the bank will calculate the interest from the 20th of the month to the end of the month and either bill you on closing or including it in your first mortgage payment.
**If you have never had to pay hydro directly they will want a approximately $300 to $350 deposit which they hold for one year then apply it as a credit to your account.
The appraisal provides the lender with a professional opinion of the market value of the property. This cost is normally the borrowers responsibility and it can range between $250 to $350 plus HST. Sometimes the costs may be higher for larger, custom-built homes or homes in a remote area.
A professional inspection of the home, top to bottom is for the benefit of the buyer. A typical home inspection can cost anywhere from $350- $400, and is well worth the investment. If the home is older then 5 years a home inspection is a must for buyers. When hiring a home inspector, make sure his is a qualified and registered home inspector and that the inspector has liability insurance.
All mortgage lenders require a certificate of fire 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 and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $400-$600 for most properties.
If your mortgage is CMHC or GE Capital insured (less than 25% down payment), there is also a P.S.T. of 8% in Ontario, soon to be HST (13%) payable at closing, on the CMHC or GE Capital fee. While the insurance premium can be added to the mortgage amount, the P.S.T. or HST (Harmonized Sales Tax) must be paid at closing. For example, a mortgage that results in a $1,000 fee will have to pay $80 in PST upon closing or $130.000 HST after June 30, 2010.
A recent Survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$1200 for a new survey. In lieu of the Survey, most lenders today will accept Title Insurance, at a much lower price of approximately $350.
A lawyer or notary 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.
In Ontario, a land transfer tax is payable by the buyer. This tax is based on the purchase price (refer to mortgage ABC's for exact calculation). In Ontario first time home buyers who purchase a new home may qualify for a refund of up to $1725. Click here for more information on Land Transfer Tax.
In Ontario, new homes are covered by a new home warranty program. The cost to the buyer 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.
On a high-ratio insured mortgage (mortgages above 80% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $175-$275 for applying and processing the file as well as appraising the property. On new homes, this fee drops to approximately $150.
An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser's responsibility. Your lawyer will let you know what they are exactly once the various searches have been completed.