Budgeting for a condo is more than just looking at the purchase price and down payment, you need to also prepare to pay the closing costs.
What exactly are closing costs? Simply put, closing costs are expenses, over and above the price of the condo, that buyers normally incur when purchasing. If you are planning to purchase a condo in the near future, don’t be caught off guard, take time to consider the most common closing costs below.
Closing Costs Prior to Closing
- Deposit – For existing condos, this amount is usually 5% of the purchase price and paid within 24 hours of your offer being accepted. For pre-construction condos, the deposit is usually much higher (20%), but you don’t need to provide all of the deposit at once. For new condo developments, the builder typically breaks up the deposit structure into smaller amounts. It is often broken down into three or four smaller payments over a few months to a few years.
- Property Appraisal – Your lender may pay for this, and it could cost $400 – $500.
- Home Inspection – You should budget between $400-700 to go to the home inspection company at the time of inspection.
Closing Costs at Closing
- The Balance of Your Purchase Price – This is the purchase price minus your initial deposit. the purchase price less your initial deposit. This amount typically is provided by your lender, which is the mortgage you now owe!
- Legal Fees – This will vary according to your purchase price, but for a good lawyer, you should expect somewhere around $1,500+. It’s well worth it. After all, they will be the ones reviewing your contract for you to make sure that you are not being taken advantage of!
- Title Insurance – This is sometimes added to your legal fees and can be anywhere from $250-$400 so do not be surprised if your legal fees are higher than what you thought.
- Ontario Land Transfer Tax
- Toronto Land Transfer Tax
In Toronto, home buyers are subject to not one, but two transfer taxes!
The Ontario Land Transfer Tax, and the Toronto Land Transfer Tax.
Here is how you calculate the Ontario Land Transfer Tax:
0.5% on the first $55,000
1.0% on the amount between $55,000 and $250,000
1.5% – on anything between $250,000 and $400,000
2.0% – on anything over $400,000
First-time buyers in Ontario may qualify for a credit worth up to $4000.
The Toronto Land Transfer Tax has a similar tax breakdown:
0.5% – on the first $55,000
1.0% – on the amount between $55,000 – $400,000
2.0% – on anything over $400,000
First-time home buyers in the city of Toronto can receive a rebate on a portion of the municipal land transfer tax they’re required to pay up to $4,475.
- Harmonized Sales Tax – This only applies to new construction houses and condos. In the majority of cases, particularly when buying a pre-construction condo in the Greater Toronto Area (GTA), you’ll receive the HST rebate right away in the form of a discounted purchase price. Most condo and home developers already factor the HST rebate into their prices.
- Property Tax Adjustment – For existing homes, if the seller has already paid the property taxes beyond the closing date then the buyer must reimburse the seller for that payment at closing.
- Tarion Warranty Fees – Tarion is the warranty on new construction condos and houses only, not resale. On new build condos, there is an enrollment fee. The fee depends on how much the purchase price of your condo is. Just like with the HST, the developer may have already included this cost in your final price. You can estimate Tarion Fees here.
- Adjustments for Utilities/Condo Fees/etc – Just like property taxes, the seller of an existing condo may have prepaid for things like utilities, or condo Fees prior to closing. The buyer will be responsible for the reimbursement of those fees to the Seller upon closing.
- CMHC Insurance Premium – The Canada Mortgage and Housing Corporation charges a mortgage insurance premium if your deposit is less than 20%. The premium is typically between 0.5% and 2.5% of the principal of the mortgage insurance. Often, this fee can be factored into your mortgage so you won’t have to pay it up front. Click on this link to estimate the CMHC insurance.
Closing Costs After Closing
- Setting up your Utilities – Things like Cable, internet, etc.
- Moving expenses – You’re not going to do it yourself, are you?
- Furniture and Decor – You’ll need new furniture for your amazing new place!
Do you have any questions about closing costs? Call, text, or email me anytime!
