What to Know About Closing Costs

Prospective Canadian homebuyers should be aware that they may pay approximately 4 percent of a home's selling price in closing costs. These costs quickly add up and a budget should be created to account for the fees and specific events that may require payment before closing on a home.

Get more information on closing costs and associated events that can easily exceed a homeowner's original budget.

Initial Cash Outlays

When homeowners want to purchase a home they will give an Offer to Purchase. At this point a deposit is required that will eventually be used as part of the full down payment of a home. The minimum percentage expected in Canada is 5 per cent. While this amount will be part of the eventual down payment, homeowners need to be prepared to provide this deposit earlier than the rest of the down payment amount. The minimum down payment in Canada is 5 per cent for homes under $500,000.

Another aspect of the Offer to Purchase is the home inspection. Homeowners must contract with a home inspector in order to assess the condition of the home and generate a report. This can cost homeowners around $500 but can actually help Prairie Springs homeowners learn more about the state of the home, any repairs needed and can serve to reduce the purchase price of a home in certain instances.

Home Buyer Closing Costs

There are additional closing costs that potential home buyers can expect to have to pay when closing on a home. Some mandatory closing costs would need to be covered by all home buyers. Other closing costs are applicable in specific situations. Funds should be set aside for:

• The PST on CMHC insurance required to paid at the time of the closing;
• Title insurance ranging from $100 - $300;
• Legal fees which will cost at least $500; and
• A Land Transfer Tax or LTT and possibly a municipal LTT. The amount varies based on province.

Certain buyers may have to content with closing costs that include water tests, an Estoppel Certificate Fee or testing of a septic tank. Speak with a trusted agent to learn more of mandatory costs specific to a property and local area. This does not take into account other costs, such a packing, storage, or moving costs, that many homeowners will need to pay during the final stages of closing and moving into a new home.

Other Closing Costs

There are other incidental costs that may need to be taken care of before taking possession of a new home. Property insurance needs to be handled prior to the handing over of keys. Some percentage of the property taxes may need to be paid back to the previous owner in certain situations. When costs have been prepaid by the owner, as with utilities, the owner may want to get some measure of reimbursement from the buyer.

Create a Cushion

Delays may happen and homeowners may need to pay for additional storage or wait until a repair is made before moving in. Adjustment costs for prepaid costs made by the seller may create additional expenses for buyers. Legal costs and Title Insurance may also need to be covered. While seller's generally cover their lawyer's fees, mortgage discharge and commission fees, it is best to be aware of the responsibilities and charges that are paid by buyers and sellers prior to offering to purchase a home.