Closing cost Ontario
Closing cost in Ontario is one of the most critical aspects of buying a home, as a first-time home buyer or purchasing a condominium for real estate investment.
It is important to know that completing the transaction will cost you some money.
There is nothing worse than going through the entire process and finding out on the day of funding that the cash on hand is not enough to cover all the closing costs in Ontario.
Closing costs Ontario include your real estate lawyer’s fee and other legal and administrative charges depending upon the nature of the real estate transaction.
Below is the list of items which are part of the legal fees. Make sure you have enough savings which cover the closing cost in Ontario.
Careful consideration is highly recommended on, this aspect of a transaction. Good planning will help you stay away from any cash shortfalls on your closing day.
Ontario's 7 Vital Closing Costs
The lenders require proof that you have 1.5% of the home s purchase price available to pay for your closing costs. (legal fees/disbursements/property purchase tax). Some lenders waive this requirement for First Time home buyers within the allowed purchase limit as Property Transfer Tax is waived for them.
You will also have to have either a site survey or title insurance (title company) on the property. In many instances, the realtor or seller will have a survey that is valid to use. However, if there is no one available, then you will be responsible to have one done.
Your real estate lawyer or notary will make sure this is done for you and the cost of a survey is approximately $300. You can choose to have title insurance instead which is a little bit cheaper at approx. $200, but is a one-time thing (if you should refinance your mortgage, you will need to repurchase this, whereas a survey would be reusable for 20 years).
This is the tax a home buyer pays to the provincial government. In Toronto Ontario, you pay provincial plus the municipal tax.
As a first time home buyer in Ontario, you get a rebate of $4,000.If you like to know how much land transfer tax you will pay on your next purchase in Ontario, download our free mortgage calculator app.
Although most of the first-time home buyers will not be charged lender and/or broker fees, there are some instances where this fee will be charged.
It is worth noting that some mortgage brokers and lenders also charge an application fee and/or application fee to initiate the approval process.
But in most instances, especially for conforming deals (credit, income, and down payment/ home equity), there are no fees charged to the borrower and the broker gets paid by the lender.
One example is private mortgages, second mortgages, or even Alternative A lenders.
Another cost to be aware of is, the lawyer’s fees you will have to pay to either a lawyer or notary for registering your mortgage. It ranges from $800-$1300, depending upon the lawyer you decide to work with. A statement of adjustments will be prepared by a lawyer/ notary outlining all the fees involved prior to closing.
Many times home buyers assume a lawyer’s fee as the total legal fee, which is not true. The legal fee costs includes the lawyers and any other administrative costs to complete the real estate purchase or refinancing transaction
You will have to have house insurance in place before you get your mortgage. The reason for this is to protect the lender’s security in case of fire or any other damage to the property. Expect the insurance premiums to be approx. $50/month depending on the property.
Your notary or lawyer will request insurance agent information from you to make sure you have this in place before your mortgage closes.
In most cases, if you have a high ratio mortgage (less than 20% down) you will have to pay a mortgage insurance premium. This is a one time premium that insures the lender against the default of the mortgage. The mortgage premiums range from .50% to 2.75% for standard conforming mortgages but can be higher for non-conforming deals.
These premiums do not have to be paid upfront, but you will have the option to do so. Most people choose to have this amount added to the mortgage amount. Some alternative lenders have their own application fees that usually can be added to the mortgage as well.
Homeownership comes with an additional expense called annual property tax. Most of the time you can have 1/12 of your property tax payment added to your mortgage payment.
With high ratio mortgages, lenders will most likely not give you an option, as they will want the taxes added to your mortgage payment. But if you have 20% down or more, you usually have the option to pay your own taxes or have the lender pay them.
If your mortgage closes after the taxes have been paid for the year you will have to have enough to reimburse the sellers for the length of time you own the home for that year. But if you close the transaction before the taxes have been paid then, the sellers must reimburse you for the months they have owned the home for that year.
However, you will have to pay the entire year’s taxes by the beginning of July. Check for Tax due dates in the municipality you are purchasing in.
Ontario Land Transfer Tax Calculator:
Below are the details for manual calculations of the Ontario land transfer tax. If you like you can download our mortgage calculator app which calculates mortgage payments and land transfer taxes accurately.
0.5% of the value of the property up to and including $55,000
1% of the value which exceeds $55,000 up to and including $250,000
1.5% of the value which exceeds $250,000 up to and including $400,000
2% of the value between $400,000 and $2,000,000
2.5% for amounts exceeding $2,000,000, where the land contains one or two single family residences
Toronto Land Transfer Tax:
0.5% up to and including the first $55,000
1% of the value which exceeds $55,000 up to and including $250,000
1.5% of the value between $250,000 and $400,000
2% of the value between $400,000 and $2,000,000
2.5% of the value over $2,000,000
Is home inspection part of the closing cost in Ontario?
A home inspector’s visit is neither required by the lender nor the mortgage default insurance providers; however, it’s a strategic and smart investment.
A proficient home inspector can help you find significant foundation issues that will cost you thousands of dollars to fix!!
Can you imagine buying a home and not having a home inspection done later to find out there is?
A house inspection costs around $400 and will be worth every penny for the peace of mind.
I strongly recommend having this done!
Is appraisal fee part of the closing cost in Ontario?
If you’re serious about buying a property, having an appraisal done is a must.
This appraisal, which ensures that the market value of the property is accurately and properly calculated, necessitates a fee that usually averages $300-$600; the amount is dependent on both the size and location of the property.
Therefore, if you’re planning to purchase with 20% down or more or use an alternative lender, keep in mind that appraisal fees are likely to be part of the equation.
FAQ - Closing Cost Ontario
No closing cost can not be rolled into your mortgage. It is due on the day of closing.
You can pay this via draft to your real estate lawyer representing you in your real estate transaction.
The exact figures will depend upon your purchase price and the location of the property.
As a rule of thumb, you should account around 1.5% of the purchase price of your property.
No, appraisal cost is not part of the closing cost however some private landers may have it included in your total closing cost.
No, its not part of the closing cost however some private mortgage lenders may choose to include it into the closing costs.
It is your lawyers job to make you aware of all the expenses included in your closing costs.
Closing cost on real estate investment property is tax deductible.
Real estate seller in Ontario pays part of the closing cost.
They dont pay land transfer tax however they have to pay lawyers fee.
In Ontario seller does not pay land transfer tax.
Typically closing cost does not depend upon the mortgage interest rate you pay.
It is important to know when alternative or private lenders are involved there are additional charges which include lender fee, broker fee and application fee etc.
Yes presently there is a land transfer tax rebate for up to $4,000 for first time home buyers in Ontario.
When ever you buy a real estate in Toronto, you pay municipal land transfer tax above the municipal tax. Both of these taxes are due upon closing with your real estate lawyer.
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