As the purchase of a new home winds down, the last thing you want to be left wondering is: ‘How much are closing costs’ Indeed, closing costs are paramount to purchasing a new home. It’s not only because they are required, but because they can easily add up. While closing might seem a world away, knowing about the costs involved will definitely benefit you moving forward.
This is our definitive guide to ‘How much are closing costs’, where we will cover what they are, who pays for them, and how much they might cost. Stay prepared, and get ready to close…
It helps to consider our closing costs in three distinct stages: prior to closing, during closing, and after closing. Grouping it this way provides us with a good idea about how comprehensive closings costs are, and how often they operate in distinct phases.
Prior to Closing
Before the formal closing process even begins, there are three costs you need to know:
- Your deposit – 5% of your total purchase price.
- A property appraisal – Your lender may pay for this, and it could cost $400 – $500.
- A home inspection – Ranges between $400 – $700.
The vast majority of your closing costs will occur during the closing period. The ones that will appear, without fail, will be:
- The balance of your purchase price – Paid by your lender, and becoming your mortgage.
- Legal fees – These will vary wildly, depending on the cost of your home (a good starting point is at least $500).
- Ontario Land Transfer Tax – Want to know more about getting reimbursed for first-time home ownership with the land transfer tax? Have a look at this post.
- Toronto Land Transfer Tax – Different than the Ontario Land Transfer Tax, and will also be dependent on your purchase price.
- Property Tax Adjustment – Reimbursement for the seller of your new home, based on the amount of property tax they have already paid that year.
These are some of the conditional closing costs you might also encounter during the closing period:
- Title insurance – A $250 – $400 fee that is sometimes included as part of your overall legal fees.
- Mortgage broker commission – This is usually paid by the lender, if it’s applicable at all.
- Property survey – If commissioned by your lender, a property survey can cost about $1000 – $2000.
- Harmonized Sales Tax (HST) – Only applicable to new construction houses and condos.
- Tarion Warranty Fees – This is for the warranty on new construction condos and homes, not for resales.
- Provincial Sales Tax (PST) – This is only applicable on the chattels purchased from the vendor, and the cost will be entirely dependent on them.
- Adjustment for utilities and condo fees – Based on what the seller has previously paid, this is a reimbursement akin to the previously mentioned property tax adjustment.
- A CMHC insurance premium – Depending on your down payment, this is a premium charge if you’re putting down less than 20% on your new home.
Now that you’ve finished closing, you’re not done with the closing costs. When someone typically asks us, ‘How much are closing costs?’, it really must encompass all three of these distinct stages. Closing isn’t simply about owning a property in name, which is where these post-closing costs factor in:
- Moving – Depending on just how much you’re moving, this might cost you up to $1000.
- Utility set-up – This completely varies but it’s important to consider.
- Redecorating and renovating – Chances are you have already planned for the changes in your home, but you should consider this a “closing cost.”
- Immediate repairs and maintenance – What needs to change immediately in your new home? A closing cost is any money you need to put forward to ensure that your home is move-in ready.
Final Answer: How much are closing costs?
Well, there might not be a definitive answer to this question. It varies so much, which not only means that it’s important to know about them, but that you need to work with a team who can help you navigate this tricky path to home ownership.
Are you ready to work with a team that knows real estate?
For 30 years, our clients have trusted us to minimize risk, offer unbiased opinions and ensure their best interests are served. We can do the same for you. Contact us today to talk about your buying needs. Contact us at firstname.lastname@example.org or call at 416-441-2888.