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Closing Costs on a Home in Ontario: What You Need to Know

Buying a home is an exciting milestone, but it’s important to remember that the purchase price isn’t the only financial consideration. Closing costs are additional expenses that you’ll need to budget for when purchasing a home in Ontario, Canada. These costs can vary widely and can have a significant impact on your overall budget. In this article, we’ll break down some of the expected closing costs associated with buying a home in Ontario and provide examples to give you a clearer picture of what to expect.

 

  1. Lawyers Fees

One of the crucial steps in the home-buying process is legal representation. Hiring a lawyer to handle the legal aspects of your home purchase is essential for a smooth transaction. Legal fees can range from approximately $1400 to $2000. Your lawyer will ensure that all necessary documents are properly reviewed and filed, protecting your interests throughout the process.

 

  1. Title Insurance

Title insurance provides protection against potential issues with the property’s title or ownership history. While not mandatory, it’s a wise investment to safeguard your ownership rights. The cost of title insurance in Ontario can vary between $200 and $500, depending on the coverage and the value of the property.

 

  1. Land Transfer Tax

Land transfer tax is a significant closing cost that varies based on the property’s purchase price. As of the latest information, the rates in Ontario are as follows:

 

  • 1% on the first $250,000 of the purchase price
  • 1.5% on the next $250,000
  • 2% on the remainder

For instance, if you’re buying a property for $500,000, your land transfer tax calculation would be as follows:

  • 1% of $250,000 = $2,500
  • 1.5% of $250,000 = $3,750
  • Total land transfer tax = $6,250

 

  1. Home Inspection

A home inspection is a crucial step to uncover any potential issues with the property’s condition. Home inspection costs vary based on the size of the property and the inspector’s fees, ranging from $250 to $600. This expense is a valuable investment in understanding the property’s overall health. Buyers can opt to do a pre-inspection or a full inspection which varies the price as well as the size of the home.

 

  1. Property Insurance and Mortgage Insurance

Property insurance, which covers damage and loss to your property, is another essential closing cost. The cost can vary between $800 and $1500 per year, depending on the property’s value and location. Additionally, if your down payment is less than 20% of the property’s value, you’ll need to pay for mortgage insurance. This insurance protects the lender in case you default on the mortgage. The cost is approximately $65 per month.

 

Here’s a link for a CMHC (Canada’s Mortgage and Housing Corporation) Insurance calculator to see what yours might cost you. https://www.ratehub.ca/cmhc-insurance-ontario

 

  1. Survey Fee

A survey fee covers the cost of verifying the property’s boundaries and dimensions. This cost can range from $700 to $1000 and helps ensure that there are no property boundary disputes.

 

  1. Utility and Property Tax Adjustments

Utility and property tax adjustments are necessary to ensure that you’re only paying for the portion of these costs that apply to your ownership period. These adjustments can vary significantly based on factors like the time of year and the previous owner’s payments.

 

In conclusion, when budgeting for your new home purchase in Ontario, it’s crucial to factor in these closing costs alongside the purchase price. While these costs may seem daunting, being prepared for them will ensure a smoother transition to homeownership without any unexpected financial surprises. Consulting with your real estate agent, mortgage broker, and legal advisor can help you better estimate these costs and navigate the intricacies of the home-buying process.

 

Good luck in your home-buying adventure and email or call us anytime you have any questions. We’d love to help! 

 

  • The Good Manors Team

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