These are the closing costs that are usually applicable when there is a purchase of a home. Some of these costs are paid in the beginning of the home buying process but most of them are paid at the end on closing date when title is transferred to the home buyer.
An appraisal for the home that is being purchased is necessary from the perspective of a lending institution to determine the valuation of the home. Of course a lender wants to ensure that the value of the home is higher than the lending amount for protection purposes. Even though it is the lender that requests most appraisals, they are doing this on behalf of the home buyer to ensure that they are not making a poor investment decision. The appraisal report is not shared with the home buyer and it is the home buyer that is responsible for paying for the appraisal fee which can cost between $300 to $700.
Home inspection fee
Usually a home inspection is inserted as an Offer clause in order to protect the prospective home buyer from any unusual circumstances that may come up with the house from a structural standpoint. The property’s structure and amenities may include electrical, insulation, heating and air conditioning, floors, windows and doors, roof, plumbing and ceiling. Home inspectors should be members of the Ontario Association of Home Inspectors (OAHI). It is the home buyer that is responsible for paying this fee which usually is about $500.
A property survey is typically requested for homes in rural areas or homes that are situated in mixed land use areas. A survey will indicate the measurement and boundaries of the land and also all major structures and if there are any visible or registered easements or encroachments on the property. It is not uncommon for a seller to provide an old survey of the property being sold and in this situation a buyer should be skeptical of an old survey if improvements have been made after the survey was completed. A property survey is not normally requested for a home in a subdivision, which home boundaries are usually all the same. The approximate cost for a property survey is about $500 – $700.
Mortgage Loan Insurance
This is a form of protection for the lender in the event that the borrower (or home buyer) defaults on the mortgage. This type of loan insurance is required for a home buyer that makes a down payment of less than 20% of (the lesser of the purchase price or property value). The premiums for mortgage loan insurance ultimately are passed on from the lender to the borrower. Here is a summary of the loan insurance costs.
Property insurance offers a blanket of protection for the home being purchased which usually includes protection from fire, water damage, natural disaster and theft of contents. A home buyer prior to buying property insurance should read policy coverage and exclusions. The onus is on the home buyer to understand the property coverage that they are purchasing but more importantly to ask questions to the insurance company regarding coverage specifications and also review claims history. A home buyer may think that they are covered for a specific event only to find out the hard way that they are not covered. Always read the fine print of your insurance policy and request clarification if you do not understand. Property insurance can range from $50 to $150 per month.
Mortgage Application Fee and Mortgage Broker’s Fee
These are costs associated from the third party mortgage company which they charge for processing and setting up the mortgage for a home owner. There is no standard amount for how much is charged for the mortgage application fee and mortgage broker fee and also sometimes these fees are absorbed by the institutional lender whereas most private lenders will require the home purchaser to pay these fees.
Land Transfer Tax In Ontario
The amount of land transfer tax that a home buyer has to pay depends on if the home is located in Toronto or outside of Toronto. If the home is located in Toronto then a home buyer is responsible for paying both the Provincial Land Tax (Ontario) and the Municipal Land Tax (Toronto).