![\"\"](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2019\/04\/Best-time-to-buy-and-sell-a-house-summer-for-sale-sign-1.jpg\")
<\/a>Photo: James Bombales\u00a0<\/em><\/p>\nHow much should you put aside?<\/h2>\n
\u201cWhen speaking with homebuyers, we typically recommend setting aside between three percent and four percent of the purchase price of a home to cover closing costs,\u201d explains Darrell Majdell, the Regional Vice President of the Mortgage Specialist Sales Force at BMO. \u201cThat acts as a good benchmark and should cover homebuyers in most scenarios. For example, on a $400,000 home, you would want to set aside between $12,000 and $16,000 for closing costs, which would cover expenses like legal fees, moving, taxes, and utilities.\u201d<\/p>\n\n
Toronto-based mortgage agent Lisa Okun calculates it a little differently. \u201cWhen I\u2019m working with a client, if I know the purchase price they\u2019re considering, I\u2019ll tell them the land transfer tax on the particular property, because that\u2019s usually the biggest closing cost. Some lenders require that you show 1.5 percent of the purchase price available in your bank account for closing costs. Even if they end up being more, they want to see you have those funds.\u201d<\/p>\n
Land transfer tax<\/h2>\n
When you acquire land, you have to pay land transfer tax \u2014 a provincial and\/or municipal tax that is calculated based on the purchase price and varies across provinces. Generally, it only applies to resale homes. New construction homes are usually exempt \u2014 although some provinces will still require you to pay some tax on them.<\/p>\n
\u201cWhat\u2019s interesting to note on land transfer tax is that it\u2019s not consistent across the country. In Alberta, for example, there is none, so homebuyers don\u2019t have to factor it in. Toronto is a different story,\u201d says Majdell.<\/p>\n
Torontonians are especially unlucky, because they have to pay both Ontario land transfer tax (OLTT) and Toronto land transfer tax (TLTT). The percentage varies based on the purchase price and can range anywhere between 0.5 percent and 2.5 percent for each. Say you want to buy a $500,000 condo. Prepare to hand over two percent of the purchase price for OLTT, and 2 percent for TLTT. That\u2019s a $10,000 sticker price, my friends.<\/p>\n
\u201cThere is a rebate for first-time homebuyers, where they can get some relief. If you\u2019re in Toronto, you can get a City of Toronto rebate and a provincial one. If you\u2019re buying outside of Toronto, you only get the provincial one. On a lower purchase price, the rebate sometimes covers the whole thing,\u201d says Okun.<\/p>\n
To avoid confusion between where your property stops and your neighbour\u2019s begins, most lenders require you to do a land survey (although some may accept the last one done on the property by the previous owners). This can run anywhere between $1,000 and $2,000.<\/p>\n Planning to put down less than 20 percent on a downpayment? You\u2019re going to get dinged with CMHC insurance, which protects the lender in the event you default on your mortgage payments. While technically not a closing cost (as it\u2019s lumped into your monthly mortgage payments), it\u2019s an additional cost outside of the purchase price that can easily run you thousands of dollars.<\/p>\n That said, if you live in Manitoba, Ontario or Quebec, you need to make some cash liquid on closing day for the provincial sales tax (PST) on your CMHC insurance. In Toronto, for example, it\u2019s 8 percent. So if your CMHC insurance is $8,000, you\u2019ll have to contribute $640 for PST.<\/p>\n Lost your head in a bidding war<\/a>? Appraisals protect the lender to ensure you paid an appropriate price for the house and that it aligns with the market value.<\/p>\n Who pays? \u201cThe appraisal fee is negotiated between the mortgage representative and the homebuyer. On average, the cost will typically sit around $300 to $400. In some instances, the bank will cover this fee,\u201d says Majdell.<\/p>\n If you own a property, you\u2019re going to have to pay tax on it. This helps pay for things like schools and street lights in your neighbourhood.<\/p>\n \u201cProperty tax fluctuates based on the different neighbourhoods, schools, lot size, and type of house,\u201d says Roger Travassos, a Toronto-based realtor. \u201cWhen you\u2019re looking at a home listing, it will always include the property taxes from the previous year. Most mortgage calculators can calculate property tax, and some of them will also determine what your land transfer tax is going to be.\u201d<\/p>\n Your mortgage agent will also take a look at the property tax when they\u2019re qualifying you for a mortgage. It\u2019s included in your gross debt service ratio (GDS) \u2014 which lenders use to determine what portion of your income will go towards your housing costs each month (you must come in under 32 percent to qualify for the loan). They will also factor property tax into your total debt service ratio to see what portion of your income is going towards all of your debts combined \u2014 including all costs related to shelter, credit card bills, student loans, etc. If your total debt servicing comes in under 44 percent for a particular property, you\u2019re approved.<\/p>\n If the seller prepaid for property tax or utilities, you may need to reimburse them. This is also referred to as \u201cadjustments,\u201d and will be managed by your lawyer who calculates the amount owing.<\/p>\n As soon as you\u2019re ready to sign the Offer to Purchase \u2014 the contract between the buyer and seller \u2014 it\u2019s time to lawyer up.<\/p>\n Lawyers ensure your mortgage paperwork is filed correctly, your rights are protected and that the transaction goes through. They\u2019re also the ones to hand over the keys when the deal is done. Lawyer fees can start at $500 but easily climb north of $1,000 depending on the attention you receive.<\/p>\n \u201cThe price varies a lot \u2014 it really depends on the lawyer, the size of the firm, how much emphasis they put on client care. Just like choosing a realtor or a mortgage agent, you can interview a few and see who you\u2019re comfortable with. They should be able to answer questions \u2014 especially for first-time homebuyers who feel they want to have a bit more attention and explanation. It\u2019s totally reasonable to call a few lawyers offices and see how much they charge for that type of transaction and what kind of service they offer,\u201d says Okun.<\/p>\n Your lawyer will also conduct a title search and get title insurance in place which proves that you are the legal owner. Should there be an error in the public registry or you encounter a property ownership dispute, you\u2019ll be fine. This typically costs between $100 and $300.<\/p>\n While not mandatory, it\u2019s always a good idea to get a home inspection before buying a house. You can expect to pay around $500 for this.<\/p>\n In some cases, sellers hoping for multiple offers will have a pre-listing inspection done. It\u2019s up to you if you\u2019re comfortable taking their word for it. If the thought of a flooded basement keeps you up at night, you can do your own inspection before you make an offer or you can make your offer with an inspection condition to protect you. If the home inspector finds a significant structural concern, you\u2019re off the hook.<\/p>\n \u201cHome inspection is at the buyer’s discretion \u2014 they can get it before they make their offer so they can go in firm. If they don\u2019t get the house, that\u2019s an upfront cost for them that they won\u2019t get back. When I was buying my house, I did that a few times,\u201d says Okun.<\/p>\n Everybody needs to have property insurance in place upon closing. At a minimum, it must insure your home against fire or significant damage that matches the value of the house. It\u2019s also a good idea to insure the stuff inside: furniture, electronics, jewelry and the like.<\/p>\n Again, the cost of insurance will vary based on who you go with, the value of what you would need to replace, the coverage type, etc.<\/p>\n \u201cIt\u2019s a good practice to do your due diligence and get quotes from different insurance companies,\u201d says Majdell. \u201cPeople tend to think that insurance is going to be the same, no matter who they choose. But there can be a variation on what is being covered. Homebuyers should ask for detailed overviews of what is being covered so they can make the best decision that fits their situation (and what they are looking to protect).\u201d<\/p>\n You can certainly move by yourself but if you\u2019ve got a sore back, a grand piano, lots of heavy furniture or you\u2019re on a tight timeline, you may want to call in the pros. The price will vary depending on the vendor you go with, but expect to pay up to $2,000 for professional movers.<\/p>\n \u201cIf my clients tell me they have $100,000 for a downpayment, I tell them, \u2018we\u2019re not putting $100,000 on a house, we\u2019re going to keep some money so you have some left when you move, and we\u2019re going to take closing costs out of this pot, as well.\u2019 I never want a client to spend every penny they have on a downpayment, leaving nothing left for closing costs or moving into your new house.\u201d<\/p>\n<\/a>Photo: James Bombales\u00a0<\/em><\/p>\nLand survey fee<\/h2>\n
CMHC insurance on a downpayment under 20 percent<\/h2>\n
Appraisal fee<\/h2>\n
Property tax<\/h2>\n
<\/a>Photo: alyssacloyd_\/Instagram<\/a><\/em><\/p>\nLegal fees<\/h2>\n
<\/a>Photo:\u00a0Milivoj Kuhar<\/a>\u00a0on\u00a0Unsplash<\/a><\/em><\/p>\nInspection fees<\/h2>\n
Property insurance<\/h2>\n
<\/a>Photo: thelittlegreenbean\/Instagram<\/a><\/em><\/p>\nMoving costs<\/h2>\n