What is included in the closing costs? What do we have to account for?

A lot goes into your closing costs. Here is a brief description of what you should allow for:

• Home inspection fee - approximately $300.00.
• Appraisal fee (lender will arrange appraisal at your expense - approximately $250.00.
• Legal fees for purchase of a home run anywhere from $400-$600 plus disbursements, which are the photocopies, courier costs, etc. that your lawyer incurs while processing your file. Legal fees for sale of a home run anywhere from $350-$550 plus disbursements.  Please note most lawyers offer a better rate if you are buying and selling a home and they both close on the same day, expect to pay $750-$1000 plus disbursements.
• Title Insurance if you are interested - approximately $250.00.
• Land transfer tax - this varies with the price of the home purchased. See next question.
• Registration costs - purchasers must pay the province of Ontario a registration fee on each document registered on the title to the subject property.  To register the Deed it is $70.70 and to register the Mortgage it is $70.70.

What is Land Transfer Tax and how is it calculated?

Land Transfer Tax is the tax purchasers are obligated to pay to the Province of Ontario on registration of their Deed.  The rate of tax is based on the purchase price. 

Here is how it is calculated:

• Under $250,000: Purchase price x 1% less $275.00
• Over $250,000: Purchase price x 1.5% less $1525.00
• Over $400,000: Purchase price x 2% less $3525.00

For example: if you purchase a home for $150,000 you will pay $150,000 x 1% = $1500 - $275 = $1225

Why do I need a lawyer and what is their role?

You need a lawyer to make sure there are no outstanding liens or encumbrances on the property you are thinking of buying.  They perform Title Searches on the prospective property.  They register your Deed and Mortgage and much more.  They pro-rate the taxes to the day of closing and they disperse the agents' commissions. Although it is another expense involved in the process, it is most certainly one you need.

What is Title Insurance? Is it necessary?

Title Insurance can greatly simplify real estate transactions.  It may eliminate the need for a survey and it is a way to avoid last minute title problems that could jeopardize the sale. It also provides the lending institution with certain assurances that they would otherwise not have.

How does the Buyer's  Agent get paid?

In our area, the general rule is that the seller pays both the listing and buying agents. This forms part of the MLS agreement. Although your agent, the Buyer's Agent, is looking after your interests (you will need to sign a contact to this effect ), the seller of the home you are buying pays the commissions. This is almost always 2.5% to the buyer's agent in our area. Occasionally more is offered as an incentive, rarely less, as it would be a disincentive!