Mortgage Closing Costs
Mortgage Closing Costs Toronto
When it comes to mortgage closing costs in Toronto, many first-time home buyers are blindsided when they get to their agent’s office on the big day.
Whether you are refinancing, buying, or selling a home, there are a number of closing costs that will be incurred. As a rule of thumb, you can expect your closing costs to account for between 1.5 and 4 percent of the cost of the home – and keep in mind that these costs are on top of your down payment or deposit, which is a minimum of 5 percent of the cost of your home.
At Northwood Mortgage, we believe that our clients should be well informed to avoid surprises in the process of buying their home. It is particularly important for first-time buyers to understand the various mortgage closing costs in Toronto involved in the purchasing process.
Before closing, the costs involved include:
- Deposit or down payment: This is 5 percent of the property purchase price, and is paid within 24 hours of your offer acceptance
- Property appraisal: $400 – $500 usually paid by the lender
- Home Inspection: $400 – $700 paid at the time of inspection to the home inspection company. It is usually required with resale homes
Many buyers are aware of these costs, but there are many other mortgage closing costs in Toronto you should be aware of, including:
- Land Transfer Tax (LTT): This is usually the single biggest closing cost expense on most home purchases. Every province charges a certain percentage of the property purchase price (PPP) as a tax when land is transferred from one person to another. In Ontario, LTT is calculated on a sliding scale where you pay 0.5 percent on the first $55,000 of the PPP up to 2 percent on payments over $400,000. First-time buyers are, however, eligible for a refund of up to $2,000
- Toronto Land Transfer Tax: Residents of Toronto are expected to pay an extra Municipal Land Transfer Tax to the tune of $5,725 for a $500,000 home. First-time buyers are eligible for a rebate of up to $3,725 that can be claimed for you by your lawyer during deed registration
- High Ratio Insurance: This mortgage default insurance is based on a sliding scale ranging from 0.5 percent to 2.75 percent, and is required for buyers making a down payment of less than 20 percent.
- Legal fees and disbursements: You will need to pay your lawyer between $1,000 and $2,000 for performing various tasks on your behalf, including performing a title search, reviewing the Offer to Purchase, registering the mortgage and deed, reviewing the mortgage contract, paying out disbursements, preparing the closing documents, etc
- Closing adjustments: This is a payment from the buyer to the seller as a refund for any overpayments made by the seller, such as property maintenance fees, property taxes, etc
- Interest adjustment (IA): An interest-only charge imposed by the lender to cover the period between when the mortgage is funded and when the mortgage term commences
- Fire insurance: This is mandatory for anyone requiring a mortgage, and depends on the building value or mortgage amount.
- Provincial sales tax (PST on high ratio insurance): In Ontario, PST is 8 percent of the high ratio insurance fees, and is paid upfront at closing
- Title insurance: Though not required, it helps protect against many risks, including title defects, fraud, and forgery, among others. It costs about $250 for a %500,000 home
Closing costs add up fast!
First-time buyers are shocked to see how fast their closing costs add up. When working with mortgage brokers like Northwood Mortgage, you will be given a breakdown of what your closing costs might be.
We are professionals, and we want to help you understand every part of the real estate transaction, including mortgage closing costs in Toronto, so you can make the most informed decisions possible.