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CLOSING COSTS WHEN BUYING REAL ESTATE
What are closing costs? They are expenses incurred over the course of your property transaction. Closing costs are in addition to your downpayment. The closing costs, though very important, are often forgotten about. I’m here to change that.
You can expect closing costs to be between 2 – 5 % of the final sale price of a home. For example, if you buy a home for $600,000, the closing costs you should expect are between $12,000 – $30,000.
Below we will go over some expenses you should expect to see when buying a home.
Land and property taxes, which is known as PTT (property transfer tax)
Property Transfer Tax refers to the mandatory tax payable to the provincial government by the purchaser of real estate. The general tax rate is 1% on the first $200,000, 2% on the amount greater than $200,000 and up to 2,000,000, and 3% on the amount greater than $2,000,000.
Legal fees
Your legal fees are compensation to lawyers or notaries involved. Services they provide include preparations of legal documents, review of contracts, and Land Title Office registration fees.
Title Insurance and Home Insurance
Title insurance is needed for legal assurance as to the state of the title. It protects lenders and buyers against damages (financial loss) due to deficiencies in the title that prevent the buyer from having clear ownership of a property. Home insurance is dealt with at the insurance provider of your choice.
Inspection Fees
If you have a property inspection clause it will take place prior to condition removal. A third party professional is hired to look over the entire property. A building’s electrical, plumbing, and foundation are just a few of the big ticket items they are inspecting.
Adjustments on prepaid taxes, utilities, and other bills
Prepaid expenses will be adjusted by lawyers or notaries. Prepaid or to-be-paid expenses are divided fairly based upon the day that ownership transfers. Days leading up to the ownership transfer is the responsibility of the seller, the day of ownership and days that follow are the responsibility of the buyer.
HST/ GST (if applicable)
This applies to properties that are brand new or have had commercial activity taking place in them. For example, a hair salon in the basement or a chicken farm would trigger a GST payment. GST, if applicable, is paid by the buyer to the seller with the purchase price. The seller will then submit it to the provincial government. GST is 5%.
As you can imagine, having these cost sneak up on you can be discouraging and can be the difference between a pleasant home buying experience and feeling blindsided by your agent and the system. Here’s to being well informed!
Shelby Huizinga
REALTOR®
Century 21 Executives Realty Ltd
“Finding home with Huizinga”
C: 778-212-5177
E: shelby.huizinga@century21.ca
