Depending on the type of mortgage transaction, there can be some differences in mortgage closing costs. In an attempt to cover all the basis, here is a laundry list of costs that could show up the list of disbursements provided to you by your lawyer at time of closing.
Its a good idea to understand what costs relate to your specific situation and to make sure that funds are available to cover everything off and complete the deal. A qualified mortgage broker can be an excellent source of information if you have any questions.
In terms of total costs, there can be quite a range from deal to deal, but a general rule would be to allow closing costs of between 1.5% to 3.0% of the property value with the majority of cases coming in around 2.0%.
Home Inspection. While this is a voluntary cost strictly borne by the buyer, its something to seriously consider as it can provide real insight into a property purchase and
can be especially valuable to those looking to purchase older homes. These inspection services can range from $200 to $500.
Property Appraisal. The mortgage lender will require a property appraisal to be issued in their name for the property you wish to finance. Each lender will have their own list of approved appraisers so its a good idea hold off getting an appraisal completed until after you have applied for financing to avoid having the appraisal done more than once. In town
residential appraisals are around $200. Rural appraisal fees tend to be higher.
Mortgage Application. For mortgages that require mortgage insurance, the insurance providers will charge an application fee of under $200.
Title Insurance / Land Survey. Most mortgage lenders will require an updated survey of the subject property to be provided. If a survey is not readily available, many mortgage lenders will also accept title insurance instead. While a new survey can cost $500+, the title insurance premium will be closer to $200.
PST on Insurance Premium. PST is charged against the insurance premium related to an insured mortgage (a mortgage that has a down payment that is less than 20% of the property value) and is payable on closing.
Fire Insurance. A certificate of fire insurance must be in place in the borrower’s name with the mortgage company named as the beneficiary prior to the borrower taking possession of the property. Insurance costs will depend on the size of the home and the coverage selected by the borrower.
Land Transfer Tax. This is different from province to province, but in most cases, the buyer of a property is required to pay a land transfer tax which is calculated off of the purchase price. Some provinces provide rebates of the this tax.
Home Warranty. New home warranty programs are available in certain provinces to protect the buyer from any deficiencies caused by the builder.
Legal Costs. The borrower’s lawyer will charge for their legal costs and any disbursements made on behalf of the borrower to complete the transaction. Fees will vary by lawyer and amount of work required.
GST. GST is payable on new homes and there are also GST rebates that you can apply for.
While the buyer is required to pay the GST, find out if its been built into your builder contract or if you will have to pay it yourself as an added cost to your contract. This can be an important cash flow consideration at the time of closing.
For a mortgage refinancing, there may be other costs to consider including prepayment penalties for retiring the existing mortgage or mortgages registered on the property before completion of their stated interest terms.
If you need any help understanding the costs related to a potential transaction, please give me a call and we will work through everything together.
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I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel