Closing costs can really add up, and if you haven’t planned for them, it can be a shock when buying or selling a home. Planning for closing costs is a necessary step in your home search or home selling efforts. Buyers and sellers will often consider the listing price of a property, but sometimes overlook closing costs that will be presented to you when you’re closing your deal.
I’ve compiled a list of the most common closing costs that you can expect when closing a real estate transaction in Ontario:
1. Home Inspection: If you’re purchasing a resale home, you’re going to want a home inspection. You wouldn’t invest hundreds of thousands of dollars on a stock you knew nothing about… This is one of the biggest purchases/investments you will make in your life, and getting a home inspection will ensure that you know what you’re getting into before sealing the deal.
A typical home inspection will cost you around $400-$500, but can save you thousands!
2. Legal Fees: People will spend a lot of time researching which restaurant to eat at or which hotel to stay at… be sure to use the same level of scrutiny when choosing a lawyer. Ask friends, family, and/or your trusted Realtor for advice or referrals. Your lawyer is advising you and guiding you through a major purchase. Be picky.
A real estate lawyer should cost you somewhere between $1000-$1500, but will depend if you’re purchasing, selling, or both.
3. Mortgage Loan Insurance (CMHC): If you have less than 20% saved up to use as a downpayment on your mortgage, you will be subject to mortgage loan insurance. This cost will vary depending on the purchase price of your home and how much you’re intending on putting down.
For information about CMHC and to help estimate the cost, please visit CMHC’s website.
4. Land Transfer Tax: When you purchase land in Ontario, you must pay Ontario’s land transfer tax, which is calculated based on the purchase price of the home.
To calculate what your land transfer tax costs will be, you can use my land transfer tax calculator.
If you’re a first time homebuyer, you might be eligible for a refund… Visit the Ministry of Finance website for more information on the First Time Homebuyer refund.
5. Real Estate Fees: When buying a home, you will likely pay nothing to your agent by way of commission. So why not hire a Realtor that you trust to help find you the right home, negotiate your deal, and guide you through the process? You will, however, pay commission when selling your home, which will typically be around 5% of the sale price of the property.
6. Home Appraisal: Most lenders in the GTA now require a home appraisal to be done before they will agree to lend you the funds against a property. With so many homes selling over the list price, they need to ensure that the property is actually worth what you’ve agreed to pay to purchase it. This will usually cost around $200, but you can try to negotiate with your current lender for a loyalty discount (or freebie!) if you’re staying with the same lender.
7. Title Insurance: Your lawyer will explain the benefits of title insurance, but in a nutshell, it will cover your for any losses incurred due to title fraud or challenges against your right to the title. Title insurance will usually be around $200-$300 but can save you a lot of money (and headaches!).
8. Adjustments: Depending on your closing date, there will be adjustments against property taxes and utilities on your purchase or sale (Ex: If you’ve paid property taxes until the end of the year, you will be entitled to a refund back to the closing date as the new owner will be responsible for property taxes after they’ve occupied the home). Pay attention to what you’ve paid for and what period each bill covers.
9. Moving Costs: This varies from person to person. If you choose to have a moving company pack your belongings and move them to your new home, it will cost you a little more. However, if you choose to rent a truck and have friends help out, it will probably cost you moving materials (boxes, tape, etc), and a truck rental… and in some cases, pizza and beer!
This list may not cover all expenses that you might face when moving, but I hope it has helped prepare you for some of the most common expenses.
I would be more than happy to answer any questions you may have about homes for sale in Durham or the closing process. .
Happy House Hunting!