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           CLOSING COSTS AND ADJUSTMENTS

Now that you know what you can afford, the next step is to determine the additional costs of the home-buying process. According to CMHC and GE Capital, one should have, in addition to the downpayment, at least 1.5% of the purchase price for closing costs (we say 2-2.5%, just to be on the safe side). The costs vary across provinces, and for that matter, cities. Below you will find a brief explanation of these costs, but a mortgage specialist at homefund.com, your realtor, and lawyer or notary, could provide a fairly close estimate.

Appraisal Fee:
The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower the borrower's responsibility and it ranges as low as $100 for a drive-by appraisal to as much as $225 for a full appraisal plus G.S.T. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.

Home Inspection Fee:
A professional inspection of the home, top to bottom, and is for the benefit of the buyer, therefore, that's who absorbs the cost. A typical home inspection can cost anywhere from $250-$350, but our opinion is that they are well worth the investment. New home buyers may not worry about it, but a definite must for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.

Fire Insurance:
All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.

Provincial Sales Tax of 8% (P.S.T.):
If your mortgage is CMHC or GE Capital insured (less than 20% down payment), there is P.S.T. of 8% in Ontario, payable at closing. While the insurance premium can be added to the mortgage amount, the P.S.T. must be paid at closing.

Land Survey Fee Or Title Insurance Fee:
A recent Survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of Survey, most lenders today will accept Title Insurance, as a much lower price of approximately $225.

Legal Costs and Disbursements:
A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus G.S.T.

Land Transfer Tax:
Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price (refer to mortgage ABC's for exact calculation). In Ontario, first time home buyers who purchase a home, whether it's new or re-sale (as of December 13, 2007) get a refund up to $2000.

In addition, if you are purchasing a home in Toronto, Toronto City Council approved a new Municipal Land Transfer Tax (MLTT) effective February 1, 2008. If you are a first-time buyer of a new home or re-sale home, you are exempt of this tax if the purchase price is under $400,000.

The MLTT will be charged on a graduated basis depending on the value of consideration paid for the property.

For property containing at least one, and not more than two, single family residences with a consideration value of:

Value of Consideration MLTT Rate
Up to and including $55,000.00 0.5%  plus
$55,000.01 to $400,000.00 1.0%  plus
Over $400,000.00 2.0%



For all other property with a consideration value:
Value of Consideration MLTT Rate
Up to and including $55,000.00 0.5%  plus
$55,000.01 to $400,000.00 1.0%  plus
$400,000.01 to $40,000,000.00 1.5%  plus
Over $40,000,000.00 1.0%


FOR EXAMPLE: A home with a consideration value of $500,000.01 (excluding GST):

MLTT Rate Calculation
0 to $55,000.00 55,000.00 x 0.005 = $275.00
$55,000.01 to $400,000.00 $344,999.99 x 0.01=$3,450.00
$400,000.01 to $500,000.00 $99,999.99 x 0.02=$2,000.00
Total MLTT= $5,725.00

New Home Warranty:
In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600 and should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.

Mortgage Application and Processing Fee:
On a high-ratio insured mortgage (mortgages above 75% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.

Closing Adjustments:
An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser's responsibility. Your lawyer/notary will let you know what they are exactly once the various searches have been completed.

G.S.T.:
On the purchase of a newly constructed home, GST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say "Plus GST" or "GST Included", and who gets the GST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees).

Moving Expense:
You can rent a truck for around $75-100 per day and do-it-yourself, friends and family, or hire professional movers (who carry insurance for damaged goods) which can cost several hundred dollars, depending how much stuff is being moved and how far.

Additional Costs:
These include utility hook-ups, any repairs, painting, etc.
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