Closing Costs for Home Buyers In Toronto
What are closing costs for home buyers in Toronto? Closing costs are the “this and that payments” that are a part and parcel of the transaction process. They are usually handled by the lawyers and are the final stage of the process. Some apply to buyers only and some to sellers. Some are common to both. It is crucial to understand that the large single elements of closing costs for buyers are directly linked to the value of the prospective purchase. The higher the value of the house the higher your closing costs are going to be. This can have a direct effect on your mortgage eligibility threshold.
The Most Common Closing Costs For House Buyers In Toronto
- New Home Warranty:Tarion is the body charged with monitoring and enforcing new construction. There is plenty of information on their website.
- Balance of the Purchase Price: the purchase price minus your initial deposit and is usually your mortgage.
- Legal Fees: these vary from firm to firm but generally are around roughly $1000-$1500. They cover Title Search and Status Certificates for condos as well as other aspects.
- Provincial Land Transfer Tax (PLTT)
- Municipal Land Transfer Tax (MLTT)
- HST: this generally only applies to new construction condos and houses but an element also applies to Brokerage Listing Fees.
- Property Tax Adjustment: reimbursement to Seller of property taxes they paid beyond the closing date.
- Adjustments for Utilities/Condo Fees/etc: reimbursement to Seller for prepaid utilities, etc.
- CMHC Insurance Premium: a mandatory insurance premium charged if you have less than 20% as a down payment. There is also HST charged to this amount which must be paid at closing time. The Insurance Premium itself can be rolled into your mortgage.
- Fire Insurance:A lender may require that the buyer show proof of fire insurance equal to either the value of the property purchased or the mortgage taken out.
- Title Insurance: can be included in your legal fees and comes in between $300 – $500.
- Mortgage Broker Commission: if applicable, generally paid by the lender.
Know And Understand Your Closing Costs Before You Buy
This is by no means an exhaustive list. Every buying scenario is different. There is another category of fees that are found in the purchase of newly built properties (new builds). These include the Tarion Warranty Fees and another Harmonized Sales Tax amongst others that we mentioned earlier. Some of these fees can get buried pretty deep in the Agreement of Purchase and Sale that builders are wont to use. We always recommend that you don’t sign anything unless you’re crystal clear on what it is you’re agreeing to.
It is important to take your potential Closing Costs into consideration as you consider your purchase. There’s no need for a Texas Instruments calculator any more. Good dedicated financial apps are aplenty in the App Store and we always recommend installing one on your phone. Once you’ve seen a couple of properties and done the maths it all starts to fall into place.
How To Roughly Calculate Closing Costs In Toronto
Mortgage advisors might recommend budgeting 1-1.5% of the purchase price to set aside for closing costs. We would recommend erring on the side of caution and budget 2-2.5% just to be sure.
Budget – Budget – Budget!!
If you would like more reading about closing costs for home buyers in Toronto please check out these links below.
Read more here about our Guide For First Time Buyers.
Here’s a post about Land Transfer Tax in Ontario and Toronto.