Buying a house in Canada is a major financial decision that requires careful planning and budgeting. One of the factors that you need to consider is the closing costs, which are the fees and expenses that you have to pay when you finalize the purchase of your property. Closing costs can vary depending on the location, type and value of the property, as well as the terms of your mortgage contract. However, there are some common closing expenses that you should know and prepare for before you sign the deal. These costs can be divided into two broad categories:
One Time Cost
Land Transfer Tax: This is a tax levied by the provincial or municipal government on the transfer of ownership of a property. The amount of land transfer tax depends on the value of the property and the location where it is situated. Some provinces, such as Alberta and Saskatchewan, do not charge land transfer tax, while others, such as Ontario and British Columbia, have different rates for different regions. In some cases, you may be eligible for a land transfer tax rebate or exemption if you are a first-time homebuyer or if you buy a newly built home.
Legal Fees: These are the fees that you have to pay to a lawyer or a notary public who will review and finalize the legal documents related to your purchase, such as the title search, the deed of sale, the mortgage contract and the statement of adjustments. Legal fees can vary depending on the complexity of the transaction and the lawyer’s or notary’s experience and reputation. You should shop around and compare different quotes before hiring a legal professional.
Appraisal Fee: This is a fee that you have to pay to an appraiser who will assess the value of the property that you are buying. An appraisal is usually required by your lender to ensure that the property is worth the amount that you are borrowing. An appraisal fee can range from $300 to $500, depending on the size and location of the property.
Home Inspection Fee: This is a fee that you have to pay to a home inspector who will examine the condition of the property that you are buying and identify any potential issues or defects that may affect its value or safety. A home inspection is not mandatory, but it is highly recommended to avoid any unpleasant surprises or costly repairs after you move in. A home inspection fee can vary from $400 to $800, depending on the size and type of the property.
Moving Costs: These are expenses that you have to incur to transport your belongings from your old home to your new home. Moving costs can include hiring a moving company, renting a truck or trailer, buying packing supplies, hiring cleaners and paying for storage. Moving costs can vary depending on how far and how much you are moving.
Recurring Monthly Costs
Mortgage Default Insurance: This is an insurance premium that you have to pay if your down payment is less than 20% of the purchase price of the property. Mortgage default insurance protects your lender in case you default on your mortgage payments. The amount of mortgage default insurance depends on your loan-to-value ratio, which is the percentage of your mortgage loan compared to the value of your property. The higher your loan-to-value ratio, the higher your mortgage default insurance premium. Mortgage default insurance can be paid upfront or added to your monthly mortgage payments.
Property Tax: This is a tax levied by the municipal government on the ownership of a property. The amount of property tax depends on the assessed value of your property and the tax rate set by your municipality. Property tax is usually paid annually, but you may have to pay a portion of it at closing if the seller has already paid it for the current year.
Home Insurance: This is an insurance policy that covers your property and its contents against damage or loss caused by fire, theft, vandalism, natural disasters and other risks. Home insurance is mandatory if you have a mortgage loan, as your lender will require it as a condition of your loan. The amount of home insurance depends on the value and features of your property, as well as the coverage and deductible that you choose. Home insurance can be paid monthly, quarterly or annually.
Utility Hook-up Fees: These are fees that you have to pay to connect or transfer services such as electricity, gas, water, telephone, internet and cable to your new home. Utility hook-up fees can vary depending on the service provider and the type of service that you need. You should contact your service providers in advance and arrange for your utility hook-up before you move in.
These are some of the closing expenses that you should know while buying a house in Canada. However, they are not exhaustive and there may be other costs that apply to your specific situation. You should consult with your real estate agent, lawyer, lender and service providers for more accurate estimates and advice on how to save money on closing costs.If you have any questions or comments, please feel free to contact us at +1-905-216-6628 or info@sanchet.com