It’s a list of charges the lawyer presents to the buyer on the closing date.
According to CMHC and Genworth Financial the buyer should have 1.5% of the purchase price for closing costs in addition to the down payment (have 2.5% to be in safe side). The cost varies in different cities and provinces.
Appraisal Fee Generally Required With New Homes:
An appraisal provides the lender with a professional opinion of the market value of the property. This cost is normally the responsibility of the homeowner and it can cost between 100$-300$.
Home Inspection Fee Required With Resale Homes:
A professional inspection of the house, worth $300-$400 usually, gives benefit to the buyer in making decision of purchase. When hiring a home inspector make sure that the inspector has liability insurance just in case he overlooks something.
Mortgage lenders require a certificate of fire insurance to be in place from the time the buyer takes possession of the home. The cost depends on the size of property, amount of coverage, the insurance company and the municipality. It is usually from $250-$600 annually for most of the properties.
Provincial Sales Tax On Mortgage Insurance:
If the mortgage is insured then the buyer has to pay the applicable taxes on the insurance premium on closing. When the insurance premium is added to the mortgage amount, the tax must be paid at closing.
Title Insurance Fee Or Land Survey Fee:
The recent survey of the property is always required for the lenders. If it is not available, the range of cost is from $600-$900 for a new survey. Most lenders prefer Title Insurance that costs less than survey.
Title to Property:
Title is the legal term for ownership of property. Buyers want "good and marketable" title to a property - good title means title appropriate for the buyer's purposes; marketable title means title the buyer can convey to someone else. Prior to closing, public records are "searched" to determine the previous ownership of the property, as well as prior dealings related to it. The search might reveal, for example, existing mortgage, outstanding taxes, utility charges, etc., registered against the property. At closing the buyer wants to get a free of such claims property. For example, the seller's mortgage will be discharged and outstanding monetary expenses (such as taxes and utility charges) will be paid for (or adjusted for) at closing. Sometimes problems (or defects) regarding title are not discovered before closing, or are not remedied before closing. Such defects can make the property less marketable when the buyer subsequently sells and, depending on the nature of the problem, can also cost money to remedy.
Protection With Title Insurance:
Title insurance policies can be issued in favor of a purchaser (on new/resale homes, condos and vacation properties), a lender, or both the purchaser and lender. Lenders will sometimes require title insurance as a condition of making the loan. Title insurance protects purchasers and/or lenders against loss or damage sustained if a claim that is covered under the terms of the policy is made.
Types of risks that are usually covered under a title insurance policy include:
• Survey irregularities
• Forced removal of existing structures
• Claims due to fraud, forgery or duress
• Unregistered easements and rights of-way
• Lack of pedestrian or vehicular access to the property
• Work orders
Zoning and set back non-compliance or deficiencies; etc. But certain types of risks might not be covered, for example, native land claims and environmental hazards are normally excluded. Be sure to discuss with your lawyer what risks are covered and what are excluded. The insured purchaser is indemnified for actual loss of damage sustained up to the amount of the policy, which is based on the purchase price. As well, some policies have inflation coverage, which means that if the fair market value of the property increases, the policy amount will also increase (up to a set maximum).
Insurance Coverage Time Span:
In the case of title insurance covering the purchaser, title insurance remains in effect as long as the insured purchaser has title to the land. Some policies also protect those who received title as a result of the purchaser's death, or certain family members (e.g., a spouse or children) to whom the property may have been transferred for a nominal consideration.
In the case of title insurance covering a lender, the policy remains in effect as long as the mortgage remains on title. A lender covered under a title insurance policy is insured in the event the lender realizes on its security and suffers actual loss or damage with respect to a risk covered under the policy. Lenders are usually covered up to the principal amount of the mortgage.
The premium for title insurance is paid once (at the time of purchase). Generally speaking, in Canada the purchaser of the property pays for the title insurance, though there can be situations where the seller pays for it. Some policies automatically cover both the purchaser and lender; others will cover both for a small additional fee.
Protection and Peace of Mind:
Title insurance can help ensure that a closing is not delayed due to defects in title. And, if an issue relating to title arises with respect to a risk covered under the policy. The title insurance covers the legal fees and expenses associated with defending the insured's title and pays in the event of loss.
Legal Costs & Disbursements:
Lawyers and Notaries charge their fee for providing their services in drafting the title deed, preparing the mortgage and conducting the various searches. Disbursements are the expenses paid during the process by lawyer such as registration, supplies and searches.
Land Transfer Tax:
Most provinces in Canada charge a land transfer tax payable by the purchaser. The amount varies in different provinces. Land transfer tax is based on the purchase price. First time buyers who purchase a new or resale home may be entitled to a refund.
• Up to $55,000 X .5 % of total property value
• From $55,000 to $250,000 X 1 % of total property value
• From $250,000 to $400,000 X 1.5 % of total property value
• From $400,000 up X 2 % of total property value
• From $90,000 to $150,000 X 1 % of total property value
• From $150,000 up X 1.5 % of total property value
New Home Warranty:
New homes are covered under a new home warranty program in the most provinces. The cost for this warranty is approximately $600. For more information about it, visit https://www.tarion.com.
HST is payable on the purchase of a newly constructed homes only. If purchasing a new home then be sure that who is paying HST, the buyer or the builder. On the offer the purchase price will say “Plus HST” or “HST Included” and who will get HST rebates. Most of the times the builders include this cost in the purchase price so the buyer doesn’t need to come up with it at closing.
An estimate should be made for closing adjustments for bills like the seller has prepaid property tax, utility bills and other charges. Any bill, after the closing date has to be paid by the purchaser. The lawyer will let you know after doing the searches about the property.
Home Ownership Vs. Renting:
Decision of buying home seems difficult but once it is taken, it opens the door for the buyer to have an asset. Renting seems easier but at the end you never have anything to say to own. The equity of the house increases over time as the mortgage is paid down. The regular appreciation of the property can be a rapid and rewarding way to increase the net worth.
Handsome Amount of Down Payment Opens The Door of Great Savings:
Depending on the type of mortgage, down payments vary from 5% to 20% of the purchase price. At least 20% down payment is required for a conventional mortgage, if not then buyer has a choice to select a high-ratio mortgage of 5% down payment and it requires to purchase default insurance. But this is a fact that if larger amount is paid as a down payment then the buyer can save in a long run.
A larger down payment:
• Reduces the monthly principal and interest payment.
• Reduces the total amount of interest the buyer pays over the life of his mortgage.
Insuring High-Ratio Mortgage:
CMHC or Genworth Financial may insure a mortgage for up to 95% of the lending value of the house so purchasers don’t need a large down payment. The availability of government-backed mortgage insurance is restricted to homes with a value of $1 million or less. Purchasers can use up to 39% of their gross family income for payments of mortgage (principal + interest), property taxes and utilities cost.
• A buyer’s total debt load (including consumer loans, etc.) cannot exceed 44% of the gross family income.
• People who have insured a mortgage loan with CMHC or Genworth pay a premium that is based on the down payment and loan amount.
• A list of the mortgage insurance premiums can be found below cost.
• Premiums can be paid up front or added to the principal amount of the mortgage.