As a buyer or seller, understanding these expenses is essential to be well-prepared financially.
In this article, we’ll demystify the costs of closing a residential real estate transaction in Ontario, guiding you through the financial aspects of buying or selling a property.
And for a more comprehensive understanding of the entire process, don’t miss our previous article, “The Essential Guide to Residential Real Estate Transactions in Ontario: A Step-by-Step Overview.”
Legal fees and disbursements
Engaging an experienced real estate lawyer is a wise investment, and their fees will vary depending on the complexity of the transaction and the firm you choose
Besides the lawyer’s fees, disbursements for services such as title searches, document registrations, and courier fees will also apply.
Generally, legal fees and disbursements range from $1,250 to $2,200.
To avoid any unexpected surprises, it’s crucial to obtain a detailed quote from your lawyer.
Land Transfer Tax (LTT)
In Ontario, property buyers need to pay the Land Transfer Tax, which is calculated based on the purchase price.
The tax follows a progressive scale, with more expensive properties attracting higher rates.
First-time homebuyers may be eligible for a refund of up to $4,000 on their Land Transfer Tax.
To help you budget for your new home, use our user-friendly Land Transfer Tax Calculator on our website.
Mortgage fees and insurance
When taking out a mortgage, you may come across various fees such as appraisal fees, loan origination fees, and mortgage broker fees.
If your down payment is less than 20% of the purchase price, you’ll also need mortgage insurance to protect the lender in case of default.
Mortgage insurance premiums depend on your down payment size and loan amount.
Home inspection fees
A home inspection is highly recommended for buyers, as it helps uncover potential issues with the property.
Home inspection fees in Ontario usually range from $300 to $500, depending on the property’s size and age.
Property insurance
Lenders often require property insurance to protect against potential losses from fire, flood, or other damages.
Insurance premiums vary based on factors like location, property value, and coverage amount.
Be sure to compare quotes from multiple insurers to find the best rate and coverage for your needs.
Adjustments
At closing, adjustments are made to account for any prepaid or outstanding expenses related to the property, such as property taxes, utility bills, and condominium fees, if applicable.
Your lawyer will provide a detailed breakdown and discuss the adjustments with you.
Moving costs
Moving can be a significant expense, whether you’re hiring a professional moving company or renting a truck and tackling the job yourself.
Remember to budget for these costs, which can range from a few hundred to several thousand dollars, depending on the distance and your belongings’ volume.
Being well-informed about the costs associated with closing a residential real estate transaction in Ontario is key to a smooth and stress-free home buying or selling experience.
By considering legal fees, taxes, mortgage-related expenses, home inspection fees, property insurance, adjustments, and moving costs, you’ll be better prepared for the financial aspects of this significant life event.
Don’t forget to use our handy Land Transfer Tax Calculator to estimate your tax expenses, and check out our previous article for an in-depth understanding of the real estate transaction process in Ontario.