What You Need to Know About Closing Costs
If your planning on purchasing your first home, you should educate yourself on closing costs. Closing cost could add up quickly, catching you off guard. It can even sometimes stop your ability to close on your purchase.
To be prepared for any surprises, you should strongly consider saving at least 2% – 4% (not including your down payment) of the purchase price of any resale home to cover your closing.
What Are your Closing Costs?
Closing costs are one-time fees, charged to the buyer of real estate. Its important to understand that closing cost are all “up front” fees and in most cases can not be lumped into your mortgage. Therefore, its a good idea to save 2% – 4%, so that your able to close the deal!
“Closing Costs” is a general term used for various fees related to the purchase of a resale home. These costs vary but may include:
- Land or property transfer taxes
- Lawyer fees
- Inspection fees.
- Appraisal Fees
- Title Insurance etc.
Most Common Types of Closing Cost Fees
These are the fees home buyers cannot escape; Land transfer tax and lawyer/legal fees. Which account for most of the costs on closing. The higher the property value the higher the tax. Land transfer tax could cost more than $10,000, and legal fees could also get quite expensive.
Land Transfer Tax
When you purchase a property, the provincial government and in some cities the municipality, always charges you land transfer tax. The amount of the land transfer tax depends on the value of your property and varies by province.
First-time homebuyers in Ontario, if eligible can receive a benefit from land transfer tax rebates. Example: A first time home buyer purchasing a $500,000 home in Toronto, can save up to $8,500. I recommend speaking with your Wise Equity agent about qualifying for the first-time home buyers incentive.
Lawyer and Legal Fees
Buying a home is a legal process, which requires you to have a real estate lawyer acting in your behalf in the purchase and mortgaging of the property. Having a lawyer close your purchase is a mandatory practice in Ontario. Legal fees however may vary, depending on the amount and level of difficulty required to close. Legal fees can cost $500 – $2500
So, remember, It is important to understand what your potential closing cost would be, associated with the property you intend to purchase. Make sure you have a special budget incorporated into your plans. Especially as a first-time homebuyer having more than just your down payment saved will go a long way.
Speak with your mortgage professional at Wise Equity. If you are a First Time Home Buyer, download our FREE E-book. Buying your first home may be easier than you think.
A Guide To Buying Your First Home
Buying your First Home may be easier than you think.