It is not only the down payment that should be a concern for prospective Canadian homebuyers. Closing costs can come up to a not inconsiderable sum, and may be as much as 4 per cent of the selling price of a Canadian home. Those looking to buy a home need to account for the fees and expenses associated with closing on a home. In many instances, payment is required prior to closing.
Understand more about closing costs and the need to budget for specific fees before taking the steps to purchase a home.
Closing Costs: Deposit and Down Payment
Closing costs may vary depending on whether or not prospective buyers make a small down payment. When homeowners make an Offer to Purchase, a deposit of at least 5 percent may be required as a part of the closing costs, payment of which is expected at an earlier stage than that of the down payment. The deposit goes towards the final down payment when the sale of the house is finalized, but it is generally refundable to the buyer in the event that the transaction falls through.
A home inspection is often part of the Offer to Purchase and can be considered part of the legal and administrative costs that come along with buying a home. This inspection may run around $500 and is used for assessment of the state of the home. Agents often recommend getting a home inspection to a buyer as it can reveal potential issues such a mold, pest problems, structural damage or repairs that may either need to be addressed before buying a home or help a buyer reduce the price of a home. However, there have been situations when home inspections have not uncovered all issues and when a report has included items that are relatively unimportant.
Closing Costs for the Canadian Home Buyer
Closing costs in Canada can include legal fees, home inspection fees, property valuation fees, title insurance and land transfer taxes. While some closing costs are mandatory, others may only apply in a particular situation. Know that:
- Those who have CMHC insurance will need to pay PST when closing on a home
- A payment of $100 to $300 is required for title insurance
- A minimum of $500 will be needed to pay for legal fees
- A land transfer tax and at times a municipal LTT will need to be paid
In some situations a buyer may have to pay to test a septic tank or perform water tests. Speaking with a local agent can help one understand more about mandatory and situational closing costs that may apply. In addition to those fees mentioned above, the majority of individuals need to factor in costs associated with moving into a new home.
Closing Costs Which May Apply
Other incidental costs may come up prior to taking possession. The issue of property insurance may come up as when a previous owner may need to be reimbursed for some of the property taxes they may have already paid on a home. Prepaid utilities may also make for an additional payment to the previous owner. A seller's prepaid costs may make for adjustment costs for a contracted buyer, increasing the fees and expenses expected to be paid by a Glenmore home buyer. Speaking with an agent and lawyer will allow one to get better acquainted with the types of costs paid by sellers and buyers when going through the home buying process.