Closing costs are a necessity when it comes to purchasing a home. They are not included in down payments, they are not included in monthly mortgage payments, nor are they included in the purchase price of a home, but you are still responsible for paying them, in full. Knowing they exist is half the battle, and correctly budgeting yourself to pay them when the time comes can be a huge weight off your shoulders, especially when the alternative is finding out a week before you close on the purchase of a home that you still owe thousands of dollars.

Lenders will require you to have 1.5% of a property’s purchase price available in cash to be able to cover closing costs. This amount is on top of the 5% minimum required for a down payment. Closing costs that you may be expected to pay, depending what province you live in, when purchasing a home in are as follows:

1. Appraisal- determining the value of a home.
2. Interest Adjustment- amount of interest due between your mortgage start date and the date the first mortgage payment is calculated from.
3. Property Transfer Tax- a tax paid to the provincial government when a property changes hands.
4. Legal Fees- costs associated with finalizing the sale or purchase of a property.
5. Prepaid Property Tax & Utility Adjustments- amount you will owe if the person selling you the home has prepaid any property taxes or utility bills.
6. Property Survey- legal description of the property you are purchasing including it’s location and dimension.
7. Sales Taxes- some properties are sales tax exempt (GST and/or PST), and some are not. Always ask before signing an offer.

As you can see, many factors go into determining the size of these costs. That is why it’s so important to pick up the phone and give me a quick call prior to making an offer on a home. Also, some costs may be exempt, such as the property transfer tax for first-time home buyers.  When you are in the early planning stages, another good idea would be to get a pre-approval to see exactly what you can qualify for and we factor in all closing costs in the process. We can discuss all of these things and more before signing anything that could potentially end up costing you.