Everything You Need to Know About Closing Costs
There are lots of costs to buying a home, and one that many new buyers don’t often think about are closing costs. Closing costs are legal and administrative fees that you need to pay when the home sale closes. These typically range from 1.5-4% of the purchase price, so be sure to budget for it!
But what exactly is included in closing costs?
Land Transfer Tax
All provinces in Canada have a Land Transfer Tax (LTT) that is payable on closing, although the amount varies between provinces. Toronto has an additional municipal LTT as well. LTT is calculated as a percentage of the purchase price, but you can ask your real estate agent about it!
Legal Fees and Disbursements
Home buyers can expect to incur a minimum of $500 (plus tax) in legal fees during the process. This accounts for the preparation and recording of all official documents. A real estate lawyer can help with these, although you can also ask your real estate agent for advice on these.
These days, most lenders require title insurance. This is to protect against losses in the event of a property ownership dispute. This can be purchased through a lawyer or notary, and costs around $100-300.
PST on CMHC insurance
CMHC (Canada Mortgage and Housing Corporation) insurance is financed through the mortgage, however, PST on the insurance has to be paid later, in cash, when a home is closed.
Additional Closing Costs:
There are some additional closing costs that home buyers may have to pay depending on the property and the closing agreement.
If the home uses a septic tank system (rather than a sewer system), the new buyers are advised to have it tested to ensure it is working. This costs can be negotiated with the seller, and some sellers may even do this for the buyer.
If the home is on a well system our real estate agents recommend you test the quality and supply of water. Once again, these costs can be negotiated with the seller ahead of time.
If you have any questions about closing costs or are looking to buy or sell your Richmond Hill home, contact one of our real estate agents today!