buyer closing costs

10.13.20 | Buying

The Closing Costs Every Buyer Should Know

Introduction to Buyer Closing Costs

There are many things to love about buying a home, but paying closing costs isn’t one of them. While there’s no way to get out of covering these buyer closing costs expenses, you can avoid being unprepared when they pop up. Knowing what to expect will allow you to set an accurate budget—and that can mean the difference between a stressful purchase and a smooth one!

If you’re preparing to buy a home, here are the closing costs you should expect…

Down Payment

If you obtain a mortgage, your monthly payments will cover most of your purchase price. But you’ll also pay for a portion of it at closing. This sum is what’s known as your down payment. The minimum you’ll be required to pay will depend on the cost of the property you’re buying.

For homes under $500,000, you must budget for at least 5 per cent of your purchase price. When it comes to places over $1 million, it’s 20 per cent at minimum. For properties that fall between those two amounts, you’ll pay 5 per cent on the first $500,000 and 10 per cent on any sum above that.

PST on CMHC Insurance

CMHC insurance protects your lender if you default on your mortgage. You can avoid purchasing it by making a 20 per cent down payment. If that’s not an option, you’ll pay a monthly insurance premium of between 2.8 and 4 per cent. While this amount will be added to your mortgage payments, the PST on it (8 per cent) will be due at closing.

Appraisal Fee

Once you’ve made an offer on a home, your lender will almost certainly require an appraisal. Through this process, a professional appraiser will look over the property you want to buy. They’ll determine its worth—which will impact how much you can borrow.

Appraisal fees vary, but they’re typically somewhere between $350 and $500. Luckily, many lenders are willing to cover this cost.

Inspection Fee

There’s a peace of mind that comes with getting a professional home inspection. That’s why so many buyers make their purchase conditional on a successful one! If you opt to get a property inspected before you buy it, you can expect to pay somewhere in the vicinity of $300 or $400, depending on the square footage of the home.

Legal Fees

Having qualified legal representation on your side can help ensure that due diligence is done. From reviewing your purchase agreement to making sure there are no claims against the home you’re buying, a lawyer will dot your i’s and cross your t’s at every step.

Legal fees are usually at least $500, though they can be much higher (depending on the professional you choose and the details of your deal).

Title Insurance

Issues like liens against your property (such as outstanding taxes or utilities) and pre-existing easements (which refer to someone else’s right to use your land) sometimes arise. Luckily, title insurance will protect you against challenges to your ownership. Usually, it costs somewhere between $200 and $300—and your lawyer should be able to secure it for you.

Land Transfer Tax

Paying land transfer taxes is an unavoidable part of buying a home in Ontario. It applies every time real estate changes hand in the province—and exists on a sliding scale. Depending on the price of the home you’re buying, you could pay anywhere between 0.5 and 2.5 per cent of your property’s value.

Adjustments

If the sellers have prepaid any utilities or property taxes, you may need to reimburse them. Your lawyer and the seller’s will work together, looking into dates and performing calculations in the name of fairness.

Moving Costs

While they’re often overlooked in the budgeting phase, moving costs can add up quickly. They vary depending on a host of factors, including how much assistance you’ll need. Are you planning to rent a truck, or work with full-service movers? Packing supplies can also be costly, especially if you don’t much feel like going out to collect used boxes.

All told, you could easily wind up spending $1,500 to move the contents of a two or three-bedroom house! Luckily, there are steps you can take to cut these costs. Start by considering moving mid-month (if possible), and comparing rates for movers online.

Closing costs can be confusing, but they don’t have to be. By knowing what to expect and budgeting carefully, you can cut down on some major headaches—and help ensure that your purchase is smooth!

Have a question about buying property in Peterborough or the Kawarthas? Just ask! We’ll get back to you right away.