From the time buyers begin house hunting, they start dreaming about the closing date when they will finally be homeowners. However, one mistake that buyers make is forgetting to calculate the extra costs, or what in the real estate industry agents know as closing costs. If you are feeling lost right now, we are here to help. In this article, you will find all the closing costs when buying a house in Ontario.
Before we divide all the closing costs of buying a house, you need to know what that means. When we are talking about house buying closing costs, this refers to all the additional costs you will have to pay upfront during the closing date. This means that you won’t be able to pay a monthly fee, like with your mortgage. In other words, you need to have that money already in your bank account for the closing date.
Since you will need to expend the money for the closing costs upfront, it is smart to keep in mind the amount of these final fees even before you start house hunting. Then, you might be wondering how to estimate closing costs when buying a house. You need to know that the closing costs when buying a house in Canada could vary depending on the province. For Ontario, the closing costs will be between 1.5 % and 4% of the purchasing price on the property.
Now, we are ready to take a look at the closing fees when buying a house in Ontario.
Closing costs when buying a house
The closing fees when buying a house in Ontario include legal fees, land transfer tax, title insurance, fire insurance, home inspection, property tax and the appraisal fee. Depending on other factors, you might also have to pay a municipal land transfer tax and a Stewart assist charge.
Taking all this into consideration, we are going to tell you how to estimate closing costs when buying a house. For instance, if there is a listing with a purchasing price of $600,000/-. Then according to the percentages above your closing costs could be anywhere between $9,000/- and 24,000/-. But, you will never know the exact amount until you divide the fees and add them up. That’s why in this section, you will find all the estimates for each closing cost.
Even though the down payment is not technically part of the closing costs for buying a house, we have included it in this section, because it is a crucial amount you need to have for the closing date.
What happens on the closing date is that your bank will release your mortgage funds to your real estate lawyer, who will then transfer this to the seller. However, this is not part of the down payment.
This amount would be:
- 5% for houses that cost 500,00 or less
- 10% for houses between 500,000 and 999,999
- Or 20% for homes with a purchasing price equal or above $1 million.
Remember that you need to have this money ready to go, and the deposit will be discounted from the down payment. In case you find that closing buying costs for properties in areas such as Toronto are too expensive, you can look at other options in Ontario, such as Aurora. Check out the Paradise Developments website and find out all the benefits of house hunting in Aurora.
Land Transfer Tax (LTT)
This is the first buying a house closing costs you will find anywhere and also the largest one if you are not counting the down payment within the closing costs when buying a house. The reason why you need to pay an LTT is that the property will be transferred to your name.
Here is how you can calculate the LTT depending on the purchasing price of a home in Ontario:
- Below or equal to 55,000 = 0.5%
- More than 55,000 up to or equal to 250,000 = 1.0%
- More than 250,000 up to or equal to 400,000 = 1.5%
- More than 400,000 up to or equal to 2,000,000 = 2.0%
- More than 2,000,000 = 2.5%
If you are purchasing a home in Toronto, you will also have to pay a Municipal Land Transfer Tax (MLTT), which has the same rates as an LTT. The good news is that first-time buyers can receive a rebate of both.
If you ask anyone what are the closing costs when buying a house, most people will mention the legal fees at the top. The legal fees are mainly the charges you pay to a lawyer who takes care of redacting the title deed, recording all the official documents and registering the mortgage.
There are other things a real estate lawyer can take care of, only if you want to, such as helping you get title insurance. Title insurance protects you as the homeowner from any other claims someone does towards your property.
The house buying closing costs legal fees you can expect to expend could be $500 plus GST/HST.
As mentioned before, title insurance is made to protect the homeowner from any dispute with the property. This title insurance you will need to purchase through your lawyer, and it can cost you anywhere between $100 and $500.
This is an element of the buying a house closing costs that works both ways. If you are the seller, all the taxes should be up to date, in which case you can get a Tax Certificate issued. As the buyer, if the seller already paid the full amount of property taxes for that year, you will have to reimburse them.
A home inspection makes part of the closing costs when buying a house in Ontario because it is part of the additional costs. However, a home inspection is recommended before your offer to purchase a property.
For a proper report on the whole condition of the house and any problems, the property might have, you will have to pay an inspector around $500.
An appraisal fee is required for your mortgage insurance, and the appraisal report mainly tells your lender/bank the value of your property in the market. This closing fee can cost you between $250 and $350.
How much are closing costs when buying a house?
In this article, you can find all the basic closing costs when buying a house, but you should keep in mind additional fees could appear depending on your particular situation. Overall, during the closing date, you will finally be the legal owner of the property. After paying all the closing costs, all is left to do is for the lawyer to hand over the keys and deed of your new home.