Purchasing a home is an exciting milestone, but it’s important to budget for closing costs as well as the down payment and mortgage. In Ontario, buyers face various closing costs that can add up to thousands of dollars. 

Many people looking to buy a home don’t know about these extra costs or how to figure out how much they’ll be. It’s really important to include these costs in your budget, because most of the time, you can’t add them to your mortgage payments. Instead, you’ll need to pay them before or on the day you officially buy the house. If you don’t plan for these costs, you might end up short on money when it’s time to close the deal.

 Let’s break down these expenses and explore ways to manage them effectively.

Common Closing Costs in Ontario

Closing costs are extra fees you need to pay when you buy a house. These are on top of the house price and your down payment. How much you pay depends on where you’re buying and what kind of property it is. Different places and different types of homes can have different closing costs. These are the most common ones:

Land Transfer Tax. Ontario imposes a land transfer tax based on the purchase price of your home. First-time homebuyers may be eligible for a rebate of up to $4,000.

Legal Fees. You’ll need a real estate lawyer to handle the paperwork and your real estate transaction. Expect to pay $1,500 to $2,500 for their services. You’ll also need to pay $200 for registration or title fees which should be included in your legal costs.

Title Insurance. Title insurance protects you against issues with the property’s title and someone making a fraudulent claim on your home. Costs typically range from $250 to $400.

Home Inspection. While optional, a thorough inspection can save you from costly surprises later. Many home sales are conditional on the property passing inspection. Budget $300 to $1000 for this service.

Appraisal Fee. This may be requested by your lender. An appraisal usually costs $300 to $500.

Property Survey. Some lenders may also ask for an up-to-date survey, which can cost $1,000 to $2,000.

Mortgage Insurance. For down payments less than 20%, you’ll need mortgage default insurance from CMHC, Sagen or Canada Guaranty, known as CMHC insurance. This can be up to 4% of your mortgage amount. You can add the insurance premium to your mortgage balance and pay it off as you go, but the provincial sales tax must be paid upfront.

Property Tax Adjustment. If the person selling your home is ahead on their property taxes, you may need to reimburse the seller for any prepaid property taxes.

Utility Hook-ups. There may be fees for connecting services like electricity, gas, and internet.

Moving Costs. Don’t forget to budget for the actual move, which can vary widely depending on distance and volume.

To get a basic idea of what these closing costs will amount to, check the closing cost calculator on my website.

Strategies for Managing Closing Costs

If you’re worried about having these added costs when you’re buying your home, there are a few strategies that could save you some money. Shop around for services like home inspections and legal representation to find competitive rates. Sometimes the seller may be willing to cover some of the closing costs, like a home inspection, to motivate you to buy. 

Some mortgage lenders allow you to add closing costs to your mortgage, spreading the expense over time. Working with a mortgage broker can help you find lenders who will do this. Take advantage of First-Time Homebuyer Programs, like the FHSA, to help you save for your first home tax-free. If you start saving for closing costs as soon as you begin your home search, you’ll be better prepared. Also, closing at the end of the month can reduce the amount of prepaid interest you’ll owe.

Budgeting Tips

Maybe you’ve been putting all your money into saving for your down payment. Just be aware that closing costs are on the horizon. Aim to save 1.5% to 4% of the home’s purchase price for closing costs and include a buffer for unexpected expenses. Create a detailed spreadsheet of expected costs, or consult my closing cost calculator, and update your spreadsheet as you get firm quotes. Consult with a mortgage broker or financial advisor to help plan your budget.

By understanding and preparing for these costs, you can approach your home purchase with confidence and avoid financial stress during the closing process. 

Don’t Be Blindsided By Closing Costs, Call Me To Work Out Your First-Home Financial Plan

Wouldn’t it be nice to have someone who knew all about closing costs at your side? Well, all you need to do is pick up the phone and call me to get a handle on your finances, your budgets, what closing costs you’ll be facing, and the best ways to save for them. And, I can get you pre-approved for a mortgage. As a mortgage broker and a financial advisor, I can offer you all the advice you need to get into your first home. Call me today at 705-315-0516, or book a consultation. Get the expert help you need!