Guide to Closing Costs in Ontario

Navigating the financial landscape of home buying in Ontario? Let’s talk about closing costs, because we know that the devil’s in the details, especially when it comes to real estate transactions.

So, you’re gearing up to dive into the Ottawa housing market? Kudos to you! But before you start popping the champagne, let’s talk about the not-so-glamorous side of homeownership: closing costs. These sneaky little expenses lurk beneath the surface, waiting to pounce on your wallet when you least expect it. But fear not, I’ve got your back with a comprehensive guide to help you conquer the closing cost conundrum with confidence.

Now, when it comes to budgeting for your dream home, don’t forget to stash away some extra cash for those pesky closing costs. Generally speaking, you’ll want to set aside between 3% and 4% of the purchase price for these expenses. So, on a cozy little abode with a price tag of $600,000, you’re looking at shelling out anywhere from $18,000 to $24,000 on closing day. And that’s on top of the hefty down payment you’ve already been squirreling away.

Now, if you’re on the selling side of the equation, lucky you! Your closing costs are relatively minimal, just the usual commission and lawyer fees to worry about. But if you’re the buyer, whether you’re eyeing a shiny new build or a charming resale, be prepared to pony up for a few extra goodies that won’t be listed on the MLS.

Let’s break down the closing costs checklist for Ontario buyers:

1. Land Transfer Tax and Property Taxes
2. Home Inspection Fee
3. Home and Title Insurance, along with CMHC Mortgage Insurance
4. Legal Fees
5. GST/HST on New Builds
6. Property Appraisal Fee
7. Government Registration Fees
8. Land Survey Fee
9. Utility Initialization Fees

1. Land Transfer Tax and Property Taxes

First up, the Land Transfer Tax and Property Taxes. Good news for you first-time buyers out there: you can kiss that land transfer tax goodbye thanks to a handy refund (if you or your spouse haven’t owned a home anywhere). The land transfer tax is discounted up to $4,000 for you! But for the seasoned pros, this is one expense you can’t dodge. Don’t sweat it, though; there are plenty of free tools to help you crunch the numbers and figure out just how much you’ll owe. Search “closing cost calculator Ontario” and you’ll be right as rain.

For property taxes, you’ll have a bit more of a heads up since that information is right on MLS. It’s up to you to decide if you want these built into your mortgage amount - as they usually are - or paid separately. This number is based not on your home's purchase price as you may believe, but on the market value of your home. This range is usually between 0.5 to 2.5%.

On the note of taxes, remember that you can use up to $35,000 of your RRSPs for your down payment without being taxed! This is being increased to $60,000 sometime in the future so keep an eye out for that.

2. Home Inspection Fee

Next on the list is the Home Inspection Fee. Unless you’re feeling particularly adventurous and want to skip this step, expect to cough up at least $500 for a thorough once-over of your potential new home. Trust me, it’s a small price to pay to avoid any big surprises down the road.

3. Home and Title Insurance, along with CMHC Mortgage Insurance

Now, onto Home and Title Insurance, plus CMHC Mortgage Insurance. Your lender will likely demand proof of home insurance before they hand over the keys, so be sure to budget accordingly. And don’t forget about Title Insurance—it may not be mandatory, but it’s a small price to pay (one $400 fee) for peace of mind.

Unless you plan on putting more than 20% down on your home, you will have CMHC insurance (Canada Mortgage and Housing Corporation) as a part of your plan. It’s insurance for the lender in the case you ever default on your mortgage, so they can still get paid. Yes, this could look like thousands of dollars, but it’s built into your mortgage and paid off over the term of your loan.

Another heads-up, Provincial Sales Tax (PST) applies on these premiums for about 8% of that insurance fee.

4. Legal Fees

Let’s not forget legal fees! Don’t overlook these essential costs, which can range from $700 to $1500 or more. Your real estate lawyer will help you navigate the paperwork and ensure everything is shipshape come closing day.

5. GST/HST on New Builds

And let’s not forget about GST/HST on New Builds. If you’re eyeing a shiny new construction, be prepared to fork over that extra 13% on closing day. But hey, at least you might qualify for a sweet New Housing Rebate if your new abode falls below a certain price threshold.

6. Property Appraisal Fee

Next, securing a mortgage involves a vital step: property appraisal. Lenders need to ensure the property’s market worth matches the loan amount, hence the appraisal. This thorough evaluation, typically priced between $300 to $500, scrutinizes various aspects like location, size, and condition, comparing them to recent local sales.

With a professional appraiser's insight, both buyer and lender gain assurance. It validates the property's price and justifies the loan. Investing in this assessment upfront ensures a solid foundation for your mortgage journey.

7. Government Registration Fees

Navigating property ownership changes comes with its share of bureaucratic expenses, notably government registration fees. These cover the necessary paperwork and legal formalities for title and registration alteration, guaranteeing a documented, legally binding transaction.

Fees can fluctuate based on your location and property value, encompassing expenses like land title registration and deed transfer. For clarity, consulting with a real estate legal expert is essential. They'll decode the fee structure specific to your area, ensuring smooth sailing through the bureaucratic waters.

8. Land Survey Fee

A land survey might not always be compulsory, but it's a wise investment. It furnishes accurate property line details, potentially averting future boundary disputes and legal headaches.

Expect to shell out anywhere from $1,000 to $2,500 for this service, contingent on property size and intricacy. The peace of mind it offers is worth every penny, safeguarding your property interests down the road.

9. Utility Initialization Fees

Embarking on a new property journey entails initiating vital utilities – water, gas, electricity, and internet. While these utility initialization fees typically aren't wallet busters, they are integral to factor into your budget.

Providers might necessitate deposits or connection fees, so preemptively liaise with each to grasp their specific prerequisites. Additionally, factor in installation costs for services like internet or cable TV to avoid budget surprises.

So, there you have it—a no-nonsense guide to closing costs in Ontario. Armed with this knowledge, you’ll be ready to tackle the real estate market like a seasoned pro. If you want a seasoned pro on your side: don’t hesitate to reach out to me. Happy house hunting!