Top 10 Questions Buyers Ask – #10

18 05 2011

10. How much are closing costs?

Depending on whether you’re a first time home buyer or not, there are some government rebates that they giving out. For first time home buyers, the government will give you a credit/refund for the land transfer tax (LTT). However, if you’re buying in “Toronto”, there is a city land transfer tax on top of the Ontario LTT. The maximum tax credit you’ll get as a first time home buyer is $2000. This would offset most purchases under $400,000.

Legal fees variate between lawyers but try and budget 1.5% of the purchase price to be safe. A lot of the lawyer’s costs would be built into their price which could include Title Insurance, Government Levies, School board levies, etc. When it comes to title insurance, it should definitely be purchased with all the mortgage fraud going on these days. It could cost a few hundred dollars to over a thousand depending on the cost of the house. Most lawyers will buy the insurance for you automatically these days and just add it to the bill.

If you’re buying a condominium, you would probably get a status certificate from the condo corporation so you go into the purchase knowing how the reserve fund is (the pool of money used to do major renovations in the building), if there are any legal litigation cases against the condo corporation, it will tell you if there are any problems with the unit you’re buying, and any hidden facts you might just want to know before buying the unit based on its good looks. So if your agent isn’t putting a status certificate condition in the agreement without your consent, you should think and ask yourself if they have your best interests in mind. The status certificate costs $100 and with the new website allowing you to get it online, it comes to just under $130 to have it all emailed to you so you don’t have to pick it up.

If you’re buying a freehold dwelling, I would recommend getting a home inspection because there may be things that you may or may not know about the structure that a trained home inspector can spot out. This can cost a few hundred dollars. Having a condition put into the agreement that you are able to get a home inspection before buying a house blindfolded protects you as a buyer to know that there isn’t anything structurally concerning to you. For condominium purchasers, a home inspection isn’t as vital as the major components to the unit is the responsibility of the condo corporation to take care of. Rule of thumb: You’re responsible for everything within the walls of the unit and the Condo corporation is responsible for everything outside. So the biggest thing might be the kitchen, bathroom or laundry. Otherwise, it’s the condominiums responsibility.

House/fire insurance, renovation/repair costs, moving costs (get 2-3 estimates from reputable movers before you decide and get it in writing), etc. Depending on the seller, you might have to give a reimbursement to the sellers for payments they’ve made for the entire year (ie. property taxes) which they would prorate for your closing date in relation to what they’ve paid for. Costs for a survey or even getting a property appraisal will add on to your closing costs.

CMHC insurance (high ratio mortgages), these could all add up if you didn’t put aside enough for the closing costs and used most of it (probably) for the down payment. You can pay it up front or have it built into your mortgage payments.

In conclusion, when you know what price range you’re looking in (after doing the mortgage pre-approval), calculate and put aside approximately 3% or $10-15k of the purchase price separate from your deposit/down payment to cover your closing costs.

For any further questions, feel free to drop me a line! What’s your top 10 question as a home buyer?

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