Closing Costs
By on Mar 31, 2008
When it comes to closing costs, it's important for new homebuyers to be aware of all the fees required to seal the deal. The costs are not secret, but if you don't do your homework they're bound to surprise you.
Greg Zdniecki, an investment broker, purchased his new condominium in downtown Toronto earlier this year. Since signing on the dotted line, his closing costs have included his utility connection and the Tarion Warranty Corporation fee - formerly the Ontario New Home Warranty Program fee. As the regulator of Ontario's new home building industry, Tarion enrolls new homes for warranty coverage, investigates illegal building practices, resolves warranty disputes, and promotes high standards of construction among Ontario's new home builders.
What other costs can you expect at closing? Legal fees are usually a given since acquiring a lawyer, especially at a flat rate, can be one of the best investments a new homebuyer can make. Outside of deciphering the legalese that many closing documents include, an astute lawyer can cap some closing costs at a specific amount, and may be able to eliminate some fees completely. A quick survey showed that the flat rate for representation goes from around $700 to $1300. Have you chosen any upgrades for your new home? If so, consider them part of your closing costs as well.
Are new house closing costs on par with condo closing costs? Yes. Miguel Bautista, a Metro police officer, bought his dream home near a golf course in Brooklin, Ontario, minutes outside of Whitby. His closing costs included utility connection and installation; water meter charges; educational levy (around $2200); a municipal service deposit, which is reimbursed upon municipal assumption of the subdivision; and his Tarion Warranty fee.
Some financial good news for first time new homebuyers - besides the fact that they own a new home - is that the land transfer tax can be claimed when they file their taxes. This rebate, up to $2000, is provided courtesy of the provincial government.
Ultimately, closing costs are part of new home and condo purchases and buyers should expect that these costs will be an extra 1.5 to 3 per cent of their final purchase price. If you're in the process of buying a new home do your homework - get additional information on closing costs from your builder, mortgage company and lawyer - and that way your closing costs should come as no surprise, meaning you're that much closer to relaxing in your new home.
Closing costs in brief
Your builder, lawyer, bank or mortgage company can provide you with estimates and any additional closing costs. This summary is meant only as a guide.
Land Transfer Tax - A tax payable to the Provincial Government by the purchaser upon the transfer of title from a vendor. To calculate add the following together:
0.5% on the first $55,000 of the purchase price
1.0% of the amount from $55,000 to $250,000
1.5% of the amount in excess of $250,001 to $400,000
2.0% of the amount in excess of $400,000
(First-time new homebuyers are eligible for a rebate of up to $2000 when they file their taxes.)
Closing Costs: Cost incurred by the buyer and /or seller during the transfer of the property's ownership. These costs are over and above the price of the property, and do not include the downpayment.
Lawyer's Fees and Expenses: approximately $700 to $1300.
Mortgage Application Fee: approximately $250, although your bank may waive this.
Pre-Delivery Inspection (PDI) Fees: approximately $200 to $450, depending on the size of the dwelling.
Pre- Paid Taxes or Utility Bills: If the vendor has prepaid any bills beyond the closing date this will need to be reimbursed, usually on a pro?rated basis.
Property Insurance: This insurance covers the replacement value of your home and its contents, and your lender will usually demand this as your home is the security for your mortgage.
Taxes: 7% GST applies on all new homes. This is usually paid by the builder.
Closing the Deal and Moving In!
On the day your new home or condo closes your lender will give your your lawyer the mortgage money and you should be prepared to provide the balance of your new home's purchase price as well as an closing costs.
