Closing Costs - Expenses to Consider
Whether you are a first time home buyer or a seasoned investor in real estate, one can easily overlook one or more additional costs when doing a real estate transaction. We recognize how stressful surprise expenses can be so we have provided you with the following list to consider.
Our policy is not to charge additional fees to obtain documents such as insurance binders, title insurance or strata forms. You pay only what the additional costs actually are.
- Property Transfer Tax: The calculation is based on 1% of the purchase price up to $200,000, 2% of any amount between $200,000 and $2,000,000, 3% of any amount between $2,000,000 and $3,000,000, and 5% on any amount above $3,000,000 . (Example 1: on a purchase of a $300,000 home you will pay $4,000 in property transfer tax calculated as follows; $200,000 x .01 + $100,000 x .02 = +$4,000, Example 2: on a purchase of a $4,000,000 home you will pay $118,000 in property transfer tax calculated as follows; $200,000 x .01 + $1,800,000 x .02 + $1,000,000 x .03 + $1,000,000 x .05 = $118,000).
- Legal Fees: Our flat rate includes legal fees (the amount of time it takes for the lawyers and their assistants to complete the file), disbursements (the hard cost of the transaction) and taxes. Although 80 % of our files have a standard flat rate, sometimes additional fees apply for such items as; contract assignments, contractual holdbacks for deficiencies or strata liens, couriers and additional debt payouts. To understand how our fees will apply to your file, please contact Kearns & Company directly at 604-589-8022.
- Interest Adjustment: This is often deducted by the bank directly from your mortgage payment account on the interest adjustment date and is the interest you will pay for receiving your mortgage money before the official start of your mortgage. (e.g. your mortgage x your interest rate divided by 365 x the number of days between your completion date and the interest adjustment date ($100,000 x 6% / 365 x 8 days = $131.50).
- Property Tax and Utility Adjustment: We will adjust for the taxes and utilities. Taxes are based on the calendar year between Jan 1st and Dec. 31st and are usually due the first business day in July. Utilities can be billed yearly, quarterly or monthly and sometimes a special meter reading is required. If due date is before the completion date the seller is responsible for paying, if the due date is after the completion date the purchaser is responsible for paying. Whoever pays the bill will be credited for the number of days that they do not have possession of the property. This amount is calculated as follows; Gross Taxes (less home owner grant if applicable) divided by 365 x the number of days not in possession = credit. Jan 31st possession ($1,570 - $570 (HOG) / 365 x 31 = $84.93 credit to Purchaser.
- Strata Forms and Adjustments: When Purchasing a strata property you will need 2 strata forms to complete the transaction. A ‘Form F Certificate of Full Payment’ costs $15 and is required by the Land Title Office when transferring a strata property and the bank requires a ‘Form B Information Certificate’ which costs $35. We will obtain the Form F from the property management company and the realtor in a purchase transaction usually obtains the Form B. There will also be a maintenance fee adjustment for the days from the possession date to the end of the month. We may be required to collect a move in fee on behalf of the Strata Corporation, which is usually $50, and up to $150. A common trend with strata management companies is to charge rush fees for forms that are required in less than 7 days.
- Property Appraisal: This may be a requirement of your lender and is usually completed at the time your bank gives you its mortgage commitment. A standard residential appraisal will cost approximately $250.
- CMHC or GECAP High Ratio Insurance: Canadian law requires lending institutions to insure mortgages with less than 20% down payment/equity. The premium is a percentage of the mortgage and is added to the mortgage amount and which will then be deducted from your net mortgage proceeds.
- Property Inspection: This is usually done at the discretion of the purchaser. An inspection is a thorough evaluation of the structure, systems and components of a home. The inspection report is usually multi-paged, and comments on the condition of, but not limited to: foundations, electrical, plumbing, heating, water heaters, appliances, fireplaces, drainage, roof, walls, floors, attic, crawl spaces, patios.
- Survey Certificate: Surveys are not required on strata properties. The bank and CMHC will require a survey on unattached properties to confirm that the house and/or any outbuildings do not encroach or cross over the property lines. If a survey is not available, we will arrange for the survey to be done, though bare in mind, the cost is between $200 - $400. Title insurance can be obtained in lieu of a survey, and is usually much less expensive.
- Title Insurance: Title Insurance is often required by the bank. The cost varies based on the amount of your mortgage but you can expect to pay between $150- 250 for mortgages under 1 million. If the mortgage is above $1,000,000.00 a quote will have to be obtained at the time of the transaction and will be more expensive. Plan for an additional $1 for every $1000 more of mortgage.
- Insurance Binder: This is a requirement of the bank to confirm adequate insurance and usually costs $50-$75.
- Rush Fees: Strata forms, insurance binders, and legal fees may be subject to rush fees. To avoid rush fees you should make sure that you have hire us with as much notice as possible, but with at least a week to 10 days before your completion date. Rush fees will generally apply for completions with less than 7 days’ notice. Needless to say, the best way to avoid rush fees is to contact us as early in the process as possible and supply us with the information we need to prepare your file.
- Courier: A courier is usually needed to deliver or pick up documents and/or to deliver the payout of your mortgage. The courier costs are usually $40-80.
Note: Not all costs apply to every transaction.