When you think of the expenses associated with buying a home, it’s not just the monthly mortgage payments. Here are some of the non-recurring closing costs you may have to pay:
- Improvements (new homes) – Additions like hardwood floors, granite kitchen counters, raised ceilings, and so on, generally increase the purchase price of your home, and you can either pay for them in cash or add them to the mortgage amount (in most cases).
- Title Insurance – Title insurance is an insurance policy that protects you, the homeowner, against claims against your property or title issues. Ask your notary or lawyer if a title insurance policy would be right for you.
- Certificate of location (property survey) – Required by the financial institution to approve the loan, as well as by the notary or lawyer to proceed with the transfer of ownership. Make sure that the improvements made to the premises (terrace, patio, swimming pool) are indicated there. If the documents are not up to date, the offer to purchase should specify who, the buyer or yourself, will pay the costs of obtaining the required certificate.
- Estoppel certificate (condominiums, especially strata type) – Documents attesting to the good health and legal status of the condominium company.
- Appraisal fees (if applicable) – The appraisal is done by an independent appraiser hired by the Bank and is used to establish the market value of the property and to determine if it meets the credit criteria. This appraisal will be required or not, depending on the type of property you want to buy.
- Legal/notary fees and disbursements – You will need to hire a notary or solicitor to sign the deeds of purchase and mortgage, and you will pay the fees and disbursements in this regard. Charges for these services can vary widely; it is therefore recommended to request several quotes before making a decision.
- Township/municipality levies (for new homes in housing estates) – For works like tree planting, school taxes, and other aspects, until taken over by the municipality.
- Bridge loan (if applicable) – If the closing of the purchase of your home occurs before the sale of your current home, you will need to obtain interim financing. The bridge loan is a short-term loan which makes it possible to attenuate the lag between the purchase and the sale. Talk to your lender to find out if this product is right for you.
- Mortgage default insurance premium (high ratio mortgage) and PST (if applicable) – Your lender requires this coverage if your down payment is less than 20% of the purchase price. This premium, excluding provincial sales tax (PST), can be added to your mortgage balance. You must pay PST at closing.
- Interest Adjustment – Most lenders expect the first mortgage payment one month after closing. If the closing takes place in the middle of the month, some lenders ask that the first payment, representing at least the interest accumulated during this period, be made at the beginning of the following month, two weeks before the date on which you thought of making it. When you apply for your mortgage, check how the interest adjustment is calculated.
- Property Tax and Utility Bill Adjustments – The purchase price of an existing home is still payable “subject to customary adjustments” at closing. In other words, any amount that the seller has already prepaid will be adjusted, so you will refund the excess to the seller, and vice versa. The most common adjustments relate to property taxes and utility bills that have been paid in advance.
- Land Transfer Tax (Welcome Tax) – Most provinces levy a special fee, sometimes called a welcome tax, amounting to a certain percentage of the purchase price of the home.
Also, consider other costs
Will you need furniture for your new home? Carpet? Light fixtures? Curtains or blinds? Appliances? Do you have the equipment required to maintain the lawn and garden? Do you use movers, or do you rent a truck? Will you need boxes, bubble wrap, and tape to move?
These costs are not, strictly speaking, part of the real estate transaction, but you must plan for them in your budget. Whenever possible, plan your expenses. If necessary, decide what you can buy later, once you’ve moved in and are settled.