Buying a home in Ontario is an exciting journey, but it’s important to be prepared for the financial aspects that come with it. One aspect that often catches first-time homebuyers off guard is closing costs. These costs are in addition to your down payment and the price of the home itself. Let’s go over the most common closing costs and explain what to expect when buying a home in Ontario.
1. Legal Fees and Disbursements
One of the significant components of closing costs is legal fees. You’ll need a real estate lawyer to handle the legal aspects of your home purchase, including reviewing the purchase agreement and conducting a title search. Legal fees typically range from $1,000 to $2,500, depending on the complexity of the transaction. In addition to legal fees, there are disbursement costs, which cover expenses like title insurance, land transfer tax, and other legal-related expenses.
2. Land Transfer Tax
The Land Transfer Tax (LTT) is a significant expense when buying a home in Ontario. The amount you pay depends on the purchase price of the property. First-time homebuyers in Ontario may be eligible for a rebate, which can partially or fully offset this cost. It’s crucial to calculate your potential LTT and, if applicable, the rebate you may qualify for.
3. Home Inspection Fees
While a home inspection is not mandatory, it’s highly recommended. A qualified home inspector can identify any potential issues with the property that may not be apparent during a viewing. The cost of a home inspection in Ontario can range from $300 to $600, depending on the size and complexity of the home.
4. Appraisal Fees
Your lender may require an appraisal of the property to determine its market value. The appraisal fee typically falls in the range of $300 to $600. This fee is the responsibility of the homebuyer and is an essential part of the mortgage approval process.
5. Title Insurance
Title insurance is a one-time premium that protects you from potential title issues and discrepancies related to the property’s ownership. The cost of title insurance varies but is generally around $150 to $300. While it’s not a mandatory expense, it’s a good practice to have for added peace of mind.
6. Property Insurance
Property insurance, often required by lenders, covers potential damage to your home. The cost of property insurance varies based on factors like the property’s location, size, and value. Be sure to shop around for the best insurance rates to get the most cost-effective coverage.
7. Home Appliances and Utilities
Don’t forget to budget for setting up or transferring utility accounts, such as electricity, water, gas, and internet. If the home you’re purchasing includes appliances, you may need to budget for their maintenance, repairs, or replacements.
8. Adjustments
As part of the closing process, you may need to make adjustments to cover expenses prepaid by the seller. This can include property taxes, condo fees, or other prepaid services. Your lawyer will help ensure these adjustments are made correctly.
9. Moving Costs
Moving expenses, while not a traditional closing cost, are part of the overall financial picture when buying a home. Budget for moving services, packing supplies, and transportation costs to make your move as smooth as possible.
10. HST (Harmonized Sales Tax)
For newly constructed homes, HST applies to the purchase price. This tax is often included in the sale price, but it’s essential to clarify this with your builder and understand how it impacts your closing costs.
In conclusion, understanding and budgeting for closing costs is a crucial part of the homebuying process in Ontario. It’s essential to work with a qualified real estate agent and a mortgage advisor who can guide you through these costs and help you anticipate the financial aspects of your home purchase. Being prepared for closing costs ensures a smoother and more financially secure home-buying experience in Ontario.
