Mortgage Closing Costs
In Ontario, the closing costs of your mortgage depends on various factors, including the purchase price of the property and the specific terms of your mortgage contract. Closing costs can add up, so being aware of them and budgeting accordingly will make your home purchase that much more seamless. Below is a list of closing costs that a purchaser could encounter in Ontario.
Land Transfer Tax: This is an Ontario tax which is levied on the transfer of land based on the property purchase price. The tax varies, so the more expensive the property, the higher the tax. First-time homebuyers may be eligible for a rebate for their land transfer tax.
Municipal Land Transfer Tax (Toronto Only): The City of Toronto imposes its own land transfer tax, which is in addition to the Ontario land transfer tax. It is also based on the purchase price of the property.
Legal Fees: When you approach the ending of your homebuying journey, you’ll need a lawyer or a notary to take care of the legal aspects of the transaction. This will include things like reviewing the contracts as well as conducting a title search. The legal fees will vary depending on the professional you hire. If you need legal professional recommendations, I have wonderful partners to introduce you to.
Title Insurance: Title insurance helps protect the homebuyer against issues that may arise with the property's title, such as liens, encumbrances, or ownership disputes. The cost of title insurance varies depending on the property's value.
Home Appraisal Fee: A lender may require the homebuyer to assess the properties value through a home appraisal. If that’s the case the homebuyer will need to cover this expense. In Ontario a home appraisal typically ranges from $300 to $500+.
Home Inspection: A home inspection is an optional cost, but it’s highly recommended. Inspectors will go through the home and assess the property’s condition and identify potential issues. This can save a homebuyer money in the future if they are aware of potential problems upfront and can potentially work the cost of the repairs into the purchasing process. The cost of a home inspection can range from $300 to $600+.
Mortgage Application and Processing Fees: Some lenders may charge application and processing fees when you apply for a mortgage. These fees can vary significantly, so it's essential to inquire about them upfront.
Property Insurance: Before the lender releases the funds to a borrower the property will need to have property insurance in place. Depending on the property as well as the coverage chosen, the cost will vary.
Mortgage Default Insurance: This insurance is relevant to homebuyers whose down payment is less than 20% of the purchase price. The cost of mortgage default insurance will be determined by the size of the down payment and the mortgage amount.
Adjustments and Prepaid Expenses: You may be responsible for covering expenses like property taxes and utilities that the seller has prepaid. These costs will be adjusted at closing.
Land Survey or Certificate of Location: Depending on the lender's requirements, you may need to provide a land survey or a certificate of location. Costs can vary.
HST on New Homes: If you're buying a newly constructed home, you may be required to pay HST (Goods and Services Tax) on top of the purchase price.
With expenses coming from potentially all the above, the closing costs of a mortgage can be quite significant, so it is crucial to budget for them when you’re planning to purchase a home. As a general rule of thumb, a homebuyer should set aside approximately 2% to 5% of the purchase price. It’s advisable to work with a mortgage agent, like myself, to assist you through your specific situation, and estimate your closing costs more accurately.
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