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Closing Costs & Other Fees
 

It often comes as a surprise to many home buyers, especially first time home buyers, that there are a number of costs involved in buying a home can be more than the initial deposit!  The CMHC (The Canadian Mortgage and Housing Corporation) often demands that purchasers have 5% of the value of the home as a down payment (this includes the amount put down as a deposit in Agreement of Purchase and Sale).  Some buyers prefer to supplement this amount with an additional down payment.  If you have a substantial chunk of money set aside, it makes sense to put more down on the house because you can save thousands in mortgage interest later.

 

If your deposit is less than 20% of the purchase price, the Canada Mortgage and Housing Corporation steps in to insure the loan. Of course, there is a fee for CMHC insurance, so if you can put 20% or more down, it’ll save you money on CMHC premiums! The rates charged by CMHC can fluctuate; so for up to date rates, please visit the CMHC website.  The amount of your down payment is up to you, but remember to save some money for closing costs! The CMHC usually likes to see an additional 1.5% to 2% of the value of the home in your bank account over and above the amount of your deposit to pay additional costs such as the Land Transfer Taxes and your lawyer’s fees.  One of the most significant costs incurred in buying a home the Land Transfer Tax.  You can calculate the likely amount using the following formula:

 

 Calculating the Ontario Land Transfer Tax:

 

0.5% on the first $55,000
Plus 1% of the amount from $55,001 to $250,000
Plus 1.5% of the amount in excess of $250,001 to $400,000
Plus 2% of the amount in excess of $400,000

 

For example, on a home with a purchase price of $427,000, you would calculate the costs as follows:

 

 

$275 on the first $55,000 (55,000 x .005 = 275)

$1,950 on the next $195,000 ((250,000-55,000) x .01 = 1,975)

$2,250 on the next $150,000 ((400,000-250,000) x .015 = 2250)

$540 on the next $27,000 ((427,000-400,000) x .02 = 540)

 

 

275 + 1,950 + 2,250 + 540 = $5,015 in Land Transfer Tax for a purchase price of $427,000

 

 Also you will want to be aware of other possible costs:

 

  • Legal Fees, usually 1,200-1,800 depending upon which real estate lawyer you use.
  • Disbursements. Includes obtaining City Tax Certificate, City Zoning reports, City Engineering report, Sheriff's Certificate, Title Insurance, Registry Office searches, registering deed, registering mortgage, couriers, postage, long distance calls, etc.
  • Survey. If you decide that a new survey is needed to ensure the accuracy of the property’s boundaries and the placement of buildings, a new one will cost you about $800-$1000 or more for a larger property.
  • Adjustments. This could mean costs of pre-payment of taxes, hydro, gas, fuel, etc. calculated to the closing date.
  • Home Inspection. If you choose to have one (which I recommend for every home buyer), it will cost you approximately $300-400.
  • Mortgage costs. Sometimes there are fees associated with arranging a mortgage, such as an appraisal, which will cost around $200.
  • Obtaining of a Condominium Status Certificate. Sometimes your lawyer will pay the property management company for the Status Certificate (and bill you later as part of the Disbursements); and sometimes you will have to write the $100 cheque yourself directly to the management company.
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    Steve Baarda | Royal LePage Triland, Realty | 334 Wellington Rd. S, London, Ontario N6C 4P6 | Tel. 519.672.9880 or Fax. 519.672.5145
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