Closing costs are legal and administrative fees, and other one-time expenses you will need to pay before, on, or after your house closes. Many first time buyers underestimate the amount they will need for closing costs. You will need to budget about 3% to 4% of the purchase price of a resale home to cover closing costs. So, on a home that costs $800,000, your closing costs could be anywhere from $24,000 to $32,0000.
Closing Costs
Closing Costs Before Your Mortgage Closes
Home Inspection Fee
A home inspector will examine both the interior and exterior of your home. They will find anything that is wrong or could go wrong in the future. You can expect to pay around $500 for a home inspection, depending on the size, location and age of the home, and the complexities of the inspection.
Deposit
A deposit is required when you make an Offer to Purchase. This shows the seller you are serious and committed to buying their property. A deposit counts towards your down payment and there is no minimum required amount.
Closing Costs Covered By The Home Buyer
Land Transfer Tax
Land transfer tax is often missed when considering the total cost of buying a home. It is calculated as a percentage of the purchase price of your property.
Legal Fees & Disbursements
You can expect to pay a minimum of $500 on legal fees and disbursements. This accounts for the preparation and recording of official documents.
Title Insurance
Mortgage lenders require title insurance to protect against losses in the event of a property ownership dispute. You can expect to pay between $100 to $300 for title insurance. This can be purchased through your residential real estate lawyer.
PST on CMHC Insurance
PST on CMHC insurance must be paid in cash at the time of close.
Septic Tank
If you a purchasing a home with a septic tank, it should be tested to make sure it is working order. This cost can be negotiated with the seller and list it in your Offer to Purchase.
Water Test
If you are purchasing a home with a well, test the quality of the water, ensure there is a sufficient supply, and if the water is safe to drink. This cost can be negotiated with the seller and list it in your Offer to Purchase.
Estoppel Certificate Fee
If you are purchasing a strata or condominium, a certificate fee up to $100 may be payable.
Other Closing Costs
Property Insurance
Property insurance must be in place on closing day. It is usually paid in monthly or annual premiums. This covers the cost of replace your home and its contents.
Prepaid Utility Bills
You might need to compensate the seller for prepaid costs such as utilities and property tax.
Property Tax
Property tax varies by city and must be paid each year. It is calculated as the percentage of your home value. You may need to compensate the seller if they have already paid property tax for the full year.
