Purchasing your first home is thrilling —but there are a lot of expenses involved. Perhaps one of the greatest surprises for many new homebuyers is the closing costs. It’s important to grasp what these costs are so you can plan accordingly. Today we are going to break down everything you need to know about closing costs when purchasing your first home.
What Are Closing Costs?
Closing costs are the fees buyers have to pay to complete the home purchase. The costs can differ depending on the type of property and where the property is located. Typically, they include:
- Down payment
- Land transfer tax
- Legal fees
- Title insurance
- Home inspection and appraisal fees
- Miscellaneous costs
How Closing Costs Are Calculated
As you buy a home, knowing what each element of closing costs entails is crucial. Here’s a breakdown:
1. Down Payment
In Ontario, the deposit on resale properties is typically around 5 percent of the purchase price. This deposit also demonstrates you are serious about purchasing the item. Down payment requirements can be different when it comes to new properties.
2. Home Inspection and Appraisal Fees
Prior to closing, it is advisable to do a home inspection. It can run between $600 and $1,200. Lenders also typically require an appraisal, which costs around $500 to $1,200.
3. Home Insurance
Home insurance is required on closing day. Your lender won’t release funds for the mortgage without it. Be sure to research an insurance plan early on in the buying process.
4. Legal Fees
Legal fees include services like registering your mortgage and title. Depending on their fee structure, lawyers usually charge these from $950 to $1,350.
5. Land Transfer Tax
This is assessed based on the property values and its geographical location. If buying inside Toronto city limits, buyers will pay this tax twice. Make sure to review the rates in your local market.
6. Title Insurance
Title insurance saves you from ownership disputes and fraud. The fee is usually between $500 and $1,000, depending on the size of the property.
Typical Closing Costs in Ontario
Below is a breakdown of common closing costs you may incur:
- Down Payment: 5% of the home’s price
- Home Inspection: $600 – $1,200
- Appraisal: $500 – $1,200
- Legal Fees: $950 – $1,350
- Land Transfer Tax: Varies based on property value
- Title Insurance: $500 – $1,000
Tax Rebates and Incentives for the First-Time Homebuyer
As a first-time homebuyer, you might be eligible for rebates and incentives. These can make a big impact on your total closing costs. Make sure to check for programs offered in your area.
Final Thoughts
There are lots of fees to pay when you purchase your first home, and the closing costs can add up. Learn what to expect and plan; this will make the process easier. Please note to verify this with a real estate lawyer for the most precise, up-to-date cost information.
Looking for more tips on mortgages? Check out our guide on how to get approved for a mortgage in Canada.
Have questions about your financial options? Learn more about qualifying for a personal loan to help with your home purchase.
With the right knowledge and preparation, you can navigate the closing costs of buying your first home successfully.
