C l o s i n g C o s t s

Buying your first home is an exciting process. You determined how much home you can afford, you saved your down payment, we found the perfect home and your offer was accepted. While the purchase price of your home is the largest cost you will encounter, there are other costs to prepare for when buying a home.

It's a good idea to budget some extra cash to cover the cost of obtaining a mortgage and "closing" your real estate transaction. Here are some of the extra cost items you should consider:

Appraisal fee
Mortgage lenders will usually loan a percentage of the home's purchase price or the market appraisal of the property, whichever is lower. The appraisal is either done by someone on the lender's staff or by an outside professional approved by the lender. The cost of the appraisal is most often the responsibility of the home buyer.

Application fee
Find out whether or not your lending institution charges to process your mortgage application. In many cases, if you are dealing with a bank that you have other accounts with, they will waive the application fee.

Home inspection fee
Many homebuyers choose to have a home inspection done prior to finalizing their offer to purchase. Some lenders require a professional home inspection as well.

Legal fees
You will need to pay your lawyer to arrange your mortgage as well as for "disbursements" such as title search, drawing up the title deed and preparing and registering the mortgage.

Land transfer tax
This tax is payable by anyone who purchases property in Ontario. Myself or your lawyer can help you calculate how much tax you will pay on your purchase.

GST
If you are buying a new home, you will be required to pay Goods and Services Tax of seven percent on the price of your home. GST does not apply to most resale homes.

Insurance
There are several types of insurance that may be required when buying your home. If you are arranging a "high-ratio" mortgage (less than 25% down payment) you will need to purchase mortgage insurance. Mortgage lenders require you to carry fire and extended coverage insurance that exceeds the amount of the outstanding balance of the buildings. Other insurance you may want to consider include title insurance and life insurance.

Other costs
You will likely have to make property tax adjustments and interest adjustments on utility bills, heating oil etc. I can explain these additional costs so you have no surprises on closing day.

Maintenance and utility costs
Finally, be sure to budget for heating, electricity, water and any immediate renovations you may have planned. It's a good idea to put aside any spare cash and contribute regularly to a maintenance fund so you will be prepared for any repairs or upgrades you need to make along the way.