What Are Closing Costs?
What Are Closing Costs?
Closing costs are the fees and expenses associated with finalizing the purchase of your home. These costs are in addition to the down payment and can vary depending on the price of the property, location, and the terms of your agreement. In Canada, closing costs are a standard part of the home-buying process, and understanding them ahead of time helps you prepare for the final step of your journey, avoiding any surprises.
Here’s a breakdown of common closing costs you can expect:
- Home Inspection Fees
Before finalizing the deal, most buyers opt for a home inspection. This ensures the home is in good condition and that no major issues will arise after the purchase. In Canada, a home inspection is highly recommended but not mandatory. The cost for a home inspection typically ranges from $300 to $500, depending on the property size and location. - Appraisal Fees
Lenders in Canada may require an appraisal to determine the market value of the property. This is necessary to ensure they are lending an appropriate amount for the property. Appraisal fees generally range between $300 to $700. While some lenders may cover these costs, it is typically the buyer’s responsibility. - Title Insurance
Title insurance is common in Canadian real estate transactions and protects you from any legal issues related to the ownership of the property. It ensures there are no claims or disputes against the property that could affect your ownership. Title insurance costs can range from $200 to $1,000, depending on the property’s value. - Property Taxes
In Canada, property taxes are an essential part of homeownership. Depending on when you close, you may need to pay a portion of the property taxes for the year. If the seller has prepaid their property taxes, you will reimburse them for the time you’ll own the home. This amount is prorated and varies based on the closing date. - Lender Fees
Lenders charge various fees for processing your mortgage. These may include application fees, underwriting fees, and loan origination fees, typically totaling 1-2% of the loan amount. In Canada, lenders may also charge fees for mortgage insurance if your down payment is less than 20% of the home’s purchase price. - Closing Agent Fees
A closing agent, such as a notary or escrow officer, may charge a fee for overseeing the finalization of the sale. In Canada, the notary or lawyer handling your real estate transaction will often charge between $500 and $1,500, depending on the complexity of the deal and the province you’re in. - Recording Fees
Canadian municipalities may charge fees to record the transfer of ownership, known as the “land transfer tax” in some provinces. In Ontario, for example, the land transfer tax can be significant, and it’s important to factor it into your closing costs. These fees can vary from $50 to several thousand dollars, depending on the province and the value of the property. - Moving Costs
While not a formal closing cost, moving expenses are part of your final home-buying budget. This includes hiring professional movers or renting a truck. Moving costs in Canada can vary depending on distance and services required.