Closing costs are the fees that are associated with the purchase of a home. These costs are typically paid by the buyer and can vary depending on several factors, such as the price of the home, the location of the home, and the type of financing used.
Here are some of the most common closing costs associated with buying a home:
Land transfer tax: This is a tax that is paid to the provincial government when a property is purchased. The amount of the land transfer tax varies depending on the province, but it is typically around 1% to 2% of the purchase price.
Legal fees: Lawyers are responsible for drafting and reviewing the legal documents associated with the purchase of a home. Legal fees can vary depending on the complexity of the purchase, but they are typically around $1,000 to $2,000.
Title insurance: Title insurance protects the buyer from any unexpected liens or encumbrances on the property. Title insurance typically costs around $200 to $400.
Appraisal fee: An appraiser is responsible for determining the fair market value of the home. The appraisal fee is typically around $300 to $500.
Home inspection fee: A home inspector is responsible for inspecting the home for any defects or problems. The home inspection fee is typically around $500 to $1,000.
Other closing costs may include:
- Disbursements: Disbursements are miscellaneous fees that are paid to third parties, such as couriers, registry offices, and survey companies.
- Mortgage default insurance (CMHC insurance): This is a type of insurance that is required for mortgages with a down payment of less than 20%. The cost of CMHC insurance varies depending on the size of the down payment and the amortization period.
- Prepaid property taxes and utilities: Buyers may be required to prepay property taxes and utilities for the period of time from the closing date to the end of the current month.
- Moving costs: Buyers may also have to pay for moving costs, such as the cost of hiring a moving company or renting a moving truck.
The total amount of closing costs can vary significantly depending on the factors mentioned above. However, buyers should generally expect to pay around 2% to 4% of the purchase price in closing costs.
Here are some tips for reducing closing costs:
- Shop around: Compare quotes from multiple lawyers, title insurance companies, and appraisers to get the best possible prices.
- Negotiate: Some closing costs, such as appraisal fees and home inspection fees, are negotiable. Be prepared to negotiate with the seller to get the best possible price.
- Ask for help: Some lenders offer programs to help buyers with closing costs. Ask your lender about any programs that may be available to you.
Closing costs can be a significant expense when buying a home, but it is important to remember that these costs are a necessary part of the process. By planning ahead and shopping around, you can reduce the amount of closing costs that you have to pay.
This article is for general informational purposes only and is not legal advice. Contact us today to discuss your specific situation.