What are the closing costs when buying a home?
In the expenses related to the purchase of a house, it is necessary to consider the closing costs, which means the legal and administrative costs related to the transaction. These fees are payable one-time upon closing of the home purchase.
In general, closing costs represent between 3 and 5% of the purchase price of your property. They are to be included in your budget since, for the most part, they cannot be added to your mortgage loan.
Below are the closing costs associated with buying your home.
SUMMARY
Property inspection
Assessment fees
Title insurance
Property transfer duties
GST/HST
Adjustment of property tax
Legal fees and disbursements
Interest adjustment
Provincial sales tax on mortgage loan insurance
Before closing the transaction
Property inspection
Although optional, the pre-purchase inspection is strongly recommended to give you a fair idea of the condition of the property.
Assessment fees
Any lender requests an appraisal of the property to determine its mortgage value. It should be noted that this value may differ from the purchase price of the home.
Title insurance
The title deed is a legal and official document that proves that you own the property. Title insurance is not required, but your mortgage lender may require it. This insurance policy protects you against any loss related to title deed problems.
At the closing of the purchase of the property
Property transfer duties
Property transfer duties (welcome tax) are registration fees to be paid when acquiring real estate. These fees are payable to the municipality when the deed of sale is signed.
The amount varies depending on the value of your property and other factors. You can calculate these costs here. In addition, you can obtain a discount or an exemption under certain conditions. Check with your municipality.
GST/HST
Taxes are applied to all new properties. Ask your notary to learn more and to validate if you are eligible for federal and provincial reimbursement.
Adjustment of property tax and other expenses already paid
When you take possession of the property, it is quite possible that the seller will have already paid the property taxes, utilities and other costs that you will need to reimburse for the portion from the date of closing. This amount varies depending on the fees paid and the excess portion.
After the transaction closes
Legal fees and disbursements
You will have to pay the fees of the notary or the lawyer who accompanied you in your real estate transaction. Services include title search, title deed drafting and mortgage deed preparation.
Interest adjustment
You will have to pay the interest incurred on your mortgage between the day of closing and the day of your first payment. This amount varies depending on your loan and the time elapsed until the first payment.
Provincial Sales Tax (PST) on Mortgage Loan Insurance
Mortgage loan insurance is mandatory if your down payment is less than 20%. In Quebec, this insurance is subject to PST. While the insurance premium may be added to your mortgage, the PST is added to your other closing costs.
Other costs to expect closer to the closing of the transaction
In addition to the closing costs of buying a home and monthly mortgage payments, you need to consider other costs such as moving costs, expected maintenance costs, home insurance, co-ownership fees (condo), property tax, etc.
Your real estate broker has the expertise and the contacts to help you demystify all the costs and find the right professionals to support you in carrying out your project.
