Mortgage fees and Closing Costs

 Closing costs encompass a range of legal and administrative expenses that are essential when finalizing the purchase of your home. These costs need to be carefully considered both before and after the closing process. On average, closing costs typically amount to approximately 3% to 4% of the total purchase price of the home.

Here are the typical expenses associated with closing the purchase of a home:

• Land Transfer Taxes: These taxes are applicable in most provinces across Canada. However, Alberta and Saskatchewan have different fee structures for property transfers.
• Legal Fees: These fees cover the preparation and recording of official documents required for the property transfer. Legal fees usually start around $500 but can vary based on the complexity of the transaction. It's recommended to shop around for competitive rates among lawyers or law firms.
• Title Insurance and Search Fees: Title insurance protects against potential ownership disputes and ensures that the title to the property is clear and marketable. There are two types of title insurance: one for the homebuyer and another for the lender. A title search is conducted to verify that there are no outstanding liens or claims against the property.
• PST on Mortgage Default Insurance: In Ontario, Manitoba, and Quebec, provincial sales tax (PST) is applicable on the premium paid for mortgage default insurance, which is required for home purchases with less than a 20% down payment.
• Tarion Warranty Fees: These fees, also known as Warranty Enrolment Fees, are typically associated with new construction homes and condos. They ensure that the property is covered under the Tarion Warranty Corporation's warranty protection plan. While builders usually cover these costs, they may sometimes be passed on to the homebuyer, ranging from $385 to $1,500 depending on the purchase price of the home.
• Appraisal Fees: An appraisal is conducted to determine the market value of the property. Lenders usually require an appraisal to ensure that the property's value is sufficient to support the mortgage loan. In some cases, the homebuyer may be responsible for covering the appraisal costs, which typically range from $300 to $400.
• Prepaid Utilities and Taxes: At the time of closing, the homebuyer may need to reimburse the seller for prepaid expenses such as property taxes, utility bills (like water, electricity, or gas), and property insurance that cover the period beyond the closing date until the end of the current billing cycle.
• GST or HST on New Purchases: For newly constructed homes or properties undergoing substantial renovations, federal goods and services tax (GST) or harmonized sales tax (HST) may apply. Depending on the province, this tax may be included in the purchase price or require separate payment at closing.

Aside from the common closing costs listed above, there are other potential expenses that homebuyers should keep in mind:

• Septic Tank Testing: Required for properties with septic systems to ensure they are in proper working condition.
• Water Testing: If the property has a well for water supply, testing may be necessary to confirm water quality and safety.
• Estoppel Certificate Fee: This fee is applicable when purchasing a condominium unit, excluding Quebec. The estoppel certificate provides details about the condominium corporation's financial status and any outstanding fees or assessments.

During the closing process, your lawyer or notary public will play a crucial role in facilitating the transfer of ownership:

• They will manage and distribute funds received from your lender and your down payment.
• If there is a previous owner, they will handle the payment to them and officially register the property under your name.
• As the new homeowner, you will receive the keys to your property and a comprehensive transaction report that includes all relevant paperwork and details of the transaction.

We will make sure you are prepared to close this chapter without surprises.