Posted onMarch 07/2016
When buying a property, closing costs can sometimes be an unexpected expense at a challenging time for the buyer. It’s important to go into the home buying process with a clear understanding of the range of closing costs associated with buying properties in Canada. In this article, our specialists explain six closing costs to expect when buying a house.
- Land Transfer Tax
The land transfer tax is calculated as a percentage of the final total purchase price for a property. Homeowners should learn whether their municipal area adds a land transfer tax on top of the provincial tax that they must pay at closing. Toronto, for example, requires that buyers pay both a municipal and a provincial land transfer tax fee.
- Legal Fees
Another significant closing cost to take into consideration when buying a home is legal fees. Most home buyers won’t have experience dealing with all the purchase paperwork, and will require guidance on the preparation and filing of purchase and ownership documents.
- Title Insurance
Title insurance is paid to lenders to protect the lender against a possible ownership dispute after the purchase has been completed. It’s an insurance fee that is usually paid through the homebuyer’s lawyer and can cost between $100 and $500.
- Property Tax
Buyers may find they have to reimburse the previous owner for a portion of the property tax they’ve paid to their local municipality in the past year. If the house is purchased just after the property tax has been paid, this may be a payment the seller expects during the closing process.
- Down Payment
The down payment at closing is the cost buyers pay immediately as part of their mortgage agreement. This payment might be as little as 5% of the total cost of the property or in some cases the full property value price. It’s a payment that is due immediately upon completing the closing agreement with the buyer.
- Interest Adjustment Costs
While most lenders will expect buyers to pay their first mortgage payment one month after the closing process, some require that buyers pay their first mortgage payment in the week after closing, if their closing date falls at the end of the month. This can be a point of confusion for some buyers and must be discussed with the lender before signing any closing agreements.
By gaining a clear picture on all potential closing costs, buyers can enter the purchase agreement with a comprehensive understanding on their expenses. To discuss potential closing costs with an expert, contact our trusted team today!