Buying a home can be an anxious time for even an experienced home buyer – even more so for the first time buyer. One of the issues that causes every home buyer anxiety is wondering how much money they will need for closing. A full and complete purchase budget will be made up of 4 or 5 items.
1. Legal Fees/searches/registrations/HST – while every lawyers’ fees and costs will be slightly different, you should ensure that your lawyer provides you with a quote for all costs including HST. In some cases, a flat rate quote will not include certain searches or HST which are added to the quote at the time of closing. You should insist that the lawyer provide you with a quote that includes all of these items.
2. Land Transfer Tax – this is the tax collected by the Ontario Government on the purchase of any property. The amount of tax depends on the price of the home. First time home buyers are now entitled to a First Time Home Buyer rebate of up to $4,000.00. The rebate is applied at closing, meaning you don’t have to pay the tax and apply for the rebate – it is applied at closing and as such a first time buyer will only pay the tax above the $4,000 rebate. You can find a land transfer tax calculator online to determine the tax on your purchase price.
3. Property Tax Adjustment – in most cases when you buy a home, the Seller has paid the property taxes beyond the closing date. Ensure your lawyer provides you with a quote for the approximate property taxes based on your closing date and your annual property taxes on the new home.
4. Mortgage Charges – if you are putting less than 20% down, there will be fees from your mortgage company that the Buyer will incur on closing. Ensure your mortgage specialist advises you of these charges when you sign your mortgage documents.
5. Title Insurance – This is a policy that is purchased when you buy a property. While different types of properties have a different policy cost, and different title insurance companies have different cost structures, a typical policy will range between $250-400 and this is a one-time cost at the time of closing. The policy will protect you from most encroachment issues and from mortgage fraud for as long as you own the property.
When consulting a lawyer, ensure that they provide you with a quote that includes all of your closing costs so there are no unpleasant surprises at the time of closing.
Mike Miller
Matlow, Miller, Cummins, Thrasher
519-621-2430