Closing costs in Toronto: the often-overlooked component of a real estate transaction that can significantly impact your budget. These costs typically range between 1.5% to 4% of the property’s purchase price and cover a variety of fees, including but not limited to land transfer taxes (both provincial and municipal for Toronto residents), legal fees, home inspection fees, and appraisal fees. Understanding your closing costs is crucial. It not only prevents unexpected financial stress but also enables you to negotiate better. Some costs are fixed, while others can be reduced with the right knowledge and negotiation skills. By arming yourself with information about these fees upfront, you gain better control over your financial situation during your property journey, ultimately making the experience of home buying in Toronto smoother and more enjoyable. Remember, when it comes to real estate, knowledge truly is power.
Every real estate transaction requires the services of a lawyer to review the sale agreement, as well as confirm, convey and transfer title, and register all legal documentation. Your lawyer will also calculate and pay all disbursements to the appropriate parties, including land transfer tax, and municipal property tax and handle the transfer of the buyer and sellers’ funds on the closing date.
Legal fees are what a lawyer charges you for acting on your behalf and usually cost $1500 – $2500 depending on the work required and the details of the transaction.
Land Transfer Tax
The biggest closing cost you can expect to pay is Land Transfer Tax (LTT). All properties in Ontario are subject to land transfer tax charged by The Ontario Government. If you are buying a property within the City of Toronto, there is an additional land transfer tax.
Both levels of government understand that it is a huge burden to have to pay these taxes, so, they have implemented rebates for first-time buyers. The Province of Ontario will give up to $4000 in rebates against the LTT to first-time buyers and the City of Toronto gives back up to $4725 in rebates toward the LTT for first-time buyers.
A lender or mortgage insurer may require an appraisal to be done to verify the reasonability of the purchase price of the property to prevent mortgage fraud. If you have a 20% down payment, then lenders will typically require an appraisal. The cost of the appraisal is usually around $300 to $500 and is the responsibility of the borrower, however, depending on which lender or broker you use, the cost of the appraisal may be covered.
Disbursements are expenses that your lawyer charges for out-of-pocket expense. Below are some examples of disbursements that your real estate lawyer may charge you.
- Deed registration
- Title search fees
- Photocopy charges
- Courier charges
- Adjustments (property tax, hydro, gas, etc.)
- Buyer/Seller Disbursements
Other Costs to Consider
Here are some other examples of potential closing costs. This list is not exhaustive, and each individual deal could differ in closing costs.
- Home inspections – every time you purchase a new house, it is advisable to get a home inspection. It is always best to choose a reputable home inspector who has extensive hands-on experience in the industry. They will look over all of the major systems (plumbing, electrical, roof, etc.) and make recommendations as to what repairs (major and minor) need to be done to the house. Most people do not get home inspectors for condos as the condo corporation maintains the major systems. A typical home inspection will range in cost from about $400-$600.
- Moving Costs – Depending on the amount of stuff you have to bring to your new house you may have to hire a moving company. Their rates will vary depending on the size of the load and distance of travel.
- Renovations – Some work may be needed to make your home right for you. The cost of painting, updating the kitchen or bathrooms, finishing basement areas or other general maintenance or repairs that should be done when you first move in can add up quickly.
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