When selling or buying a home in Ontario there are hidden costs you may not know about. The purchase price may be the main event, but other closing costs can set you back if you aren’t prepared. Sellers must account for more than just agent's fees, while buyers will need to have funds readily available beyond the down payment and deposit. Here you'll read about eight closing costs you need to know to help you financially prepare for your sale or purchase.
The sale or purchase of a home would not be possible without an experienced real estate lawyer. Along with checking and transferring ownership, lawyers are also the only party who can discharge and register a mortgage to a property. They also work out other closing costs and disbursements when the new owner takes possession such as unpaid property tax. Lawyer fees can range, but on average you can expect to spend anywhere between $2,000 to +$5,000.
Land Transfer Tax
In Ontario, the Government levies a land transfer tax on every purchase of a property. The percent paid is set out by the Government in a tiered system that increases with different purchase price brackets. This tax is one of the larger expenses you will experience. If you're unsure of the amount on a purchase price, ask your agent, or search for a reputable online calculator.
Many municipalities will set their own taxes alongside the land transfer tax. Here in Toronto the Municipal, and Land Transfer Tax are equal to each other and can be referred to as MLTT. Combined they are the largest hidden closing cost. For example, the MLTT on an $800,000 purchase price is $24, 950.
A third tax that sometimes can be associated with the sale of a home is property tax. For example if you are selling your home in June and have only paid taxes up to January, the amount owing up to the date the buyer takes possession will be added on to the purchase price by the lawyer.
Before selling your home ensure you speak to your current mortgage agent about the terms of your mortgage. There are typically penalties for discharging your mortgage, and fees on bulk deposits. You can sometimes avoid these fees if you have a transferrable mortgage, or if your mortgage is assumable by a buyer.
Costs of Repairs or Replacements
If something breaks, needs maintenance or repairs during the closing period, a seller may be responsible for the costs required to return the property to its original, agreed-upon condition. Many times if these deficiencies already exist during the negotiation stages, they can be worked out then, or the buyer may request a decrease in price and choose to assume the repairs themselves.
Lastly, let’s not forget about moving costs! It is too easy to get overly excited with the sale or purchase of a home and be absent minded. Whether you are a buyer or a seller, transferring your life and all your belongings to a new property will cost you anywhere between $300- +$1,000 depending on how many items you have to move.
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