Congratulations, you’ve bought your first condo! This is an exciting milestone and something to be proud of
However, when it comes time to actually getting the keys and moving in, make sure you’ve got some wiggle room in your budget. Like a magician pulling a rabbit out of a hat, closing fees tend to appear out of nowhere/thin air. But unlike magic, they’re very real and a necessity when it comes to buying a house.
The actual amount you end up spending often stretches far beyond the sticker price. Closing costs are additional fees that account for all the nitty gritty details and paperwork required to finish the transaction. Closing fees come from a number of different sources and serve different purposes. They typically run between 1-4% of the purchase price of the condo.
Closing fees are due by or before the closing date so it’s important to be prepared and have access to additional funds in order to cover them. Here’s a list of all the different types of closing costs that may appear during the home buying process, and what they’ll end up costing you.
Land transfer tax
The land transfer tax makes up the bulk of your closing fees — everything else tends to be smaller fees associated with professional services. The total amount of the land transfer tax depends on where you live.
In Ontario, the tax rate can range from 0.5 to 2.5% depending on the value of the property. In Alberta, a land transfer costs a base rate of $50, plus $2 for every additional $5,000 of property value. In BC, it ranges between 1 and 3%.
Municipalities can also charge their own separate land transfer taxes. For example, the City of Toronto charges a municipal land transfer fee between 0.5 and 2% of the purchase on top of the Ontario tax. Be sure to familiarize yourself with your local regulations to get a sense of what these particular fees will cost.
The good news is that there is a rebate for first-time homebuyers, so you may be able to get some of that money back. In Ontario, the maximum amount you can receive back is $4,000. In Toronto, it is $4,475.
Generally, anyone purchasing a condo will retain the services of a real estate lawyer to help guide along the transaction. The lawyer assists with reviewing all of the documents associated with the transaction to make sure there are no surprises, and that the sale goes ahead as planned. Legal fees are usually around $1,500 to $2000.
Home inspection fee
It’s always a good idea to spring for a home inspection before you commit to buying a property. That way, you’ll have a full understanding of the quirks of your home and be prepared for any issues that may pop up in the future. A home inspection fee will cost approximately $500.
Every year, as a homeowner, you will have to pay property taxes on the property you own. These taxes are calculated as a percentage of the value of your home and go towards funding important municipal services. The time of year in which you purchase the condo will affect the amount of property taxes you owe.
The seller is responsible for paying the property taxes up until the closing date of the house. After that date, the buyer takes responsibility for paying the balance of the property taxes due that year. If the seller has already paid property taxes in full for the year, you may need to reimburse them.
Even condos are not immune from GST/HST. If the condo you have purchased is a new build and you are the first owner, you will need to pay taxes on the price of the condo.
The builder may have already included HST in the purchase price — but they also might not have. Make sure you read the fine print when it comes to all the agreements you’ve signed. If the price of the condo is $500,000 + $65,000 HST, you may still on the hook to pay those extra taxes.
However, there are rebates available. If your condo cost less than $450,000 before GST/HST, you might be eligible to receive a refund for the GST portion of those taxes.
Condo/strata document review
Buying a condo means you are partially investing in a building where many other people live. When you purchase a condo, you will receive access to 2 years’ worth of strata documents, which provide a general overview of what is going on in the building.
If you live in Alberta, when you get access to these documents, you can pay for a review service to help you avoid purchasing a dud condo. Review services are only available in Alberta and cost $395. No similar services are available in Ontario.
Of all the closing costs, adjustment fees may be the most complicated. These fees include condo fees, hydro and electricity, and development charges and others, and the fees are determined based on the date of sale. A lawyer will go over all the paperwork with a fine-tooth comb to ensure that all the expenses or income related to the sale are split proportionally between the buyer and seller.
Once this review has been completed, the lawyer will issue a Statement Adjustments with the final amount the buyer must pay.
Lastly, while not strictly a closing fee, you won’t want to neglect condo insurance. After all, you’re going to want to protect this newfound asset as much as possible — and in many cases, you’ll have had to get insurance in order to qualify for a mortgage.
There’s a lot to consider but if you pay attention to all these fees and prepare for them in advance, you can look forward to a headache-free closing day.
Time to pop the champagne.
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