Don't get surprised by closing costs

Don't get surprised by closing costs

When you're buying a condo, you'll be on the hook for costs above and beyond the purchase price - everything from land transfer taxes to legal fees. Here's a list to help you budget.

Before Closing

Home inspection. When you think you've found "the one," a home inspection is always a good idea - even for a condo. Here's why. Budget $400 to $700 for it.

The deposit. This is usually 5% of the purchase price, which you pay within 24 hours of your offer being accepted.

Property appraisal. Lenders want to know your new place is actually worth what you're paying for it. Expect a price tag in the range of $500 - but you may not have to pay for it, depending on your lender.

On Closing

The purchase price (less your deposit). That's the portion that comes from your lender and becomes your mortgage.

Legal fees. Depending on the lawyer you use and the value of your new home, you’ll pay between $1,200 and $2,500 in legal fees. Why do I need a lawyer?

Title insurance. This may be included in your legal fees, since it's something lawyers generally deal with - it's about $250-$400. Title insurance protects you if there are claims filed against the title of your condo for things like back taxes or unpaid loans from previous homeowners - things that could keep you from owning your new home free and clear. Want to know more about title insurance? Read this.

Land Transfer Tax. This is based on the property value, and ranges from 0.5% to 2.5%, depending on the value of the home. There's a provincial tax and a Toronto one, so 416 buyers get hit twice for the same purchase.

Ontario Land Transfer Tax

  • 0.5% on the first $55K

  • 1% on anything between $55K and $250K

  • 1.5% on anything between $250K and $400K

  • 2% on anything over $400K

Toronto Land Transfer Tax

  • 0.5% on the first $55K

  • 1% on the amount between $55K – $400K

  • 2% on anything over $400K

This land transfer tax calculator can help you figure out your costs.

Refunds for first-time buyers

Those taxes can really add up. However, as a first-time buyer, you may be eligible for an Ontario Land Transfer Tax rebate of up to $4,000. For the Toronto tax, it's a max of $4,475.

Property tax adjustment. The property tax you pay on closing is technically a reimbursement to the seller of any property taxes they’ve paid for the period after the closing date. It’ll vary, but a good estimate is around $300.

Interest adjustment. Not everyone pays this, but if you find yourself in a situation where your first mortgage payment falls a couple of weeks or more after your closing date, you may need to pay the interest accrued in that time. More on that here.

PST on your mortgage loan insurance. If you put down less than 20% and are paying mortgage insurance, you’ll also need to factor in the 8% Ontario provincial sales tax, which is due on closing day. (Yep, more taxes.)

(New builds only)
HST (sometimes). When you're buying new directly from the builder, there’s HST involved in the purchase. However, there are rebates available, and builders tend to factor that in. However, if the buyer isn’t an end user and isn’t guaranteed to qualify for the rebate, the developer will likely make them pay the rebate portion of the HST on closing, then apply for the rebate themselves after the fact.

Tarion warranty fees. This fee protects owners of new condos and houses. You can estimate them here. Some builders factor this cost into their unit price: check to make sure.

After Closing

Moving expenses. This can range from buying pizza and beer for a few willing friends to paying for professional movers, and completely depends on how much stuff you have to move.

Utilities. Hooking up your cable, hydro, etc. comes with some up-front costs.

Repairs and maintenance. If you want to paint the bedroom or upgrade the bathroom sink to make your place "yours," don't forget to factor in those costs, too.

Adjustment for utilities, condo fees, etc. If the seller has prepaid their hydro bill or next month's maintenance fees, they may want that money back. It's something to talk about with your realtor when you're settling the final details.

Overall, closing costs can add anywhere from 1.5% to 4% to the purchase price. If you don't want those extra costs to come as an (unpleasant) surprise, do your homework. (But hey, since you're reading through our First-time Buyers' hub, you're already off to a great start!)

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