Whether you are a first-time buyer, or you have been through a real estate transaction a few times, you will find it helpful to roughly calculate the balance of funds that will be due on closing. Being properly prepared and having a reserve of funds ready will alleviate some of the stress that results from seeing a final statement of adjustments.
Below is an explanation of some typical fees and disbursements that buyers will be required to pay when closing on the purchase of a residential property. This is not an exhaustive list and cost variations do occur for some of the items. Check with your Realtor for additional explanation.
Closing Costs for Home Buyers
| Item | Estimated Cost | Explanation |
|---|---|---|
| Survey | $500 - $1000 | Cost varies according to size, type and location of property. |
| Title Insurance | $250 - $350 | Cost of survey may be avoided. |
| Mortgage Financing | variable | May include application fee, insurance fee, broker’s fee and discharge fee for current mortgage. |
| Land Transfer Tax | variable | Payable on most residential real estate purchases. Buyers may be eligible for a Land Transfer Tax Rebate up to a max of $2,000 if they are first-time buyers. This tax is calculated as follows: .005 x first $55,000 plus .01 x $55,000 to $250,000 plus .015 x remainder of purchase price plus .005 surchage for any amount over $400,000 **EXAMPLE Home purchase price: $425,000 .005 x 55,000 = 275 .01 x 195,000 = 1950 .015 x 175,000 = 2625 .005 x 25,000 = 125 Total tax payable: $4,975 |
| Legal Fees | $500 - $1500 | Lawyer’s statement of account will normally include the fee, plus cost of disbursements. |
| Disbursements - city tax certificate - zoning report - engineering report - registry office search - utility searches - register deed - register mortgage - copies, fax, post, etc | $400 - $500 | Disbursements can include any of the following: Tax certificate, building clearance, title search, water and hydro certificate, natural gas status, transfer/deed, charge/mortgage, copies, faxes, long distance phone calls, courier, etc. |
| Other - adjustments for municipal taxes - fuel adjustment - Ontario New Home Warranty Plan Fee - Mortgage Interest Adjustment - Mortgage Holdbacks (for repairs or taxes) - Fire Insurance | highly variable | Adjustments are designed to ensure that all ongoing expenses of the home are being paid by the seller up to the closing date so that the buyer is only liable for these expenses from the possession date forward. Pro-rated adjustments can include the following: property taxes, fuel (applies to oil tanks), mortgage interest adjustments, holdbacks for taxes and repairs, special assessments or levies, common expenses (in the case of condominiums) |
| Applicable Taxes | variable | These relate to HST payable on applicable goods and services (lawyer fees, Realtor fees, etc) |
| Realtor fee | variable | These usually do not apply to buyers since the Realtor will receive a commission from the seller. Some exceptions can apply so it is best to discuss with your Realtor. |
Buyers should keep in mind that all the above estimates are approximate and that the list is not exhaustive. It is a good idea to discuss the subject of closing costs with your Realtor if you have questions.
Do you have a personal story to share about your experience with the closing procedures of a home? Did I omit something from the list? Please leave a comment -other readers would love to hear about it.
A special thank you to Michael Abrams from Kelly Santini LLP for providing his expertise on this very important topic. You may reach Michael at 613.829.7171 ext. 111 or at mabrams@kellysantini.com
