Connected To More

Closing Costs

Buying a home can be a stressful process and you may not know the full scope of the costs to close and finalize your purchase.  Let’s break down what some of these costs can look like in getting a mortgage.  Most lenders have a standing guideline of verifying a home buyer has 1.5% of the purchase price in closing costs.  For example: 1.5% of a $500,000 would be $7,500.  Closings costs can be more than the predicted 1.5%, but to understand that guideline better let’s review the sources of these costs.

Appraisal

An appraisal isn’t always required by a lender, but if it is the cost can vary depending on where the property is located.  If you are in a main urban center the cost can range from $200 to $350.  This can increase for a rural property, which might be a fair distance from the nearest appraisal company. These appraisals can cost $450 or more, depending on travel time and comparable properties within the area.

Home Inspection

These are not required by mortgage lenders, but are recommended for any home buyer.  Buying a home is one of the greatest financial obligations you may have, and you will want to ensure the home doesn’t have hidden and potentially costly faults or defects.   Home inspection companies create their own fee schedule, and pricing can be based on square footage, property price, or extra services added to an inspection report.  The cost of these inspections can run from $400 to more than $1000, depending on your needs.

Lawyer fees

When it comes to signing papers to finalize your purchase, of course the lawyers also need to be paid.  A typical real estate lawyer or a notary costs $1000 to $1500.  The lawyer would be responsible for registering your new mortgage, conducting a title search and getting title insurance, and creating the statement of adjustments. 

Land Transfer Tax

This tax is applied when finalizing your purchase and would be calculated by your real estate lawyer and shown on the statement of adjustments.  Land transfer tax is calculated by the purchase price of the property. In essence, the higher purchase price you pay, the more you can expect to pay in land transfer tax.  Some provinces do not apply a land transfer tax, and instead they have a set-amount transfer fee.

Title Insurance

Title insurance would be obtained by your lawyer during the closing.  Title insurance protects you and the lender from possible title fraud, or defects which may occur with the title.  With the increase in real estate fraud, title insurance protects your interests in your home.  Title insurance is around $250 and well worth it. 

Property Taxes

Property taxes will be calculated by the lawyer and this adjustment will appear on the Statement of Adjustments.  In the case the current owner has already paid for the current years property taxes, you will be reimbursing them for the amount of time in which the property will be in your name.  The property taxes vary on your housing price as well as the municipality where your home resides.

Home Insurance

Insurance for your home is required to protect against fires, floods, earthquakes, lightening, vandalism or even theft, if your insurance includes contents.  This gives you coverage should you need to have your property fixed or contents replaced.  The average cost for home insurance is $450 per year, depending on how much coverage you place on your home.

Form B (if applicable)

Form B is only applicable for any home buyers purchasing a stratified property, such as townhomes, apartments, or condominiums.  This Form B, or estoppel certificate, is a copy of the strata document for the property.  The reason for this will be to ensure there are no arrears in condo fees or any other arrears on the property.

Utilities

Utilities are arranged by the lawyer on the statement of adjustments.  If the previous owner had paid any utilities past the date in which you take possession, you pay the difference for the days in which ownership is transferred to you. 

Pin It