Understanding the Costs of Buying, Selling, and Refinancing a Home in Toronto and GTA
September 2024
When buying, selling, or refinancing a home in Canada, closing costs are an inevitable part of the process. These fees can add up quickly and catch you off guard if you’re not prepared. Let’s break down the key closing costs you should be aware of and what you can expect when going through a real estate transaction.
What Are Closing Costs in a Real Estate Transaction?
Closing costs are the fees and expenses that must be settled when a real estate transaction is finalized. These can vary depending on whether you are the buyer, seller, or homeowner refinancing your mortgage. Typically, for buyers, closing costs range between 1.5% to 4% of the home’s purchase price, while for refinancing, costs may be as little as a few thousand dollars. In some cases, you may even roll these costs into your mortgage balance, reducing out-of-pocket expenses.
Common Closing Costs When Buying a Home
Land Transfer Tax
This tax is calculated based on the purchase price and varies by province and municipality.
Potential cost: a few hundred to several thousand dollars.
Legal Fees
These cover the services of a lawyer or notary for handling the legal aspects, including title searches, title registration, and document preparation.
Potential cost: $1,500 to $3,000 or more.
Title Insurance
A one-time fee that protects against issues with the property’s title. Lenders usually require it, but homeowners can opt for additional coverage.
Potential cost: $150 to $500 or more.
Property Appraisal
Required for conventional or lower loan-to-value mortgages to assess the property’s fair market value.
Potential cost: $300 to $600 or more.
Home Inspection
While optional, a home inspection is highly recommended to uncover any potential issues.
Potential cost: $500 to $800 or more.
Property Tax Adjustments
Depending on the closing date, you may have to reimburse the seller for prepaid property taxes or receive a credit if they’ve underpaid.
Mortgage Default Insurance
If your down payment is less than 20%, mortgage default insurance is mandatory. This can cost 2.8% to 4% of the mortgage amount and may be rolled into your mortgage. In some provinces, like Ontario, Quebec, and Saskatchewan, provincial sales tax is charged on the insurance premium, which must be paid at closing.
Common Closing Costs When Selling a Home
Real Estate Commissions
Sellers typically cover the commission for both the buyer’s and seller’s agents, usually between 3% and 5% of the sale price, plus applicable taxes like HST.
Legal Fees
These fees cover the legal aspects of verifying ownership and ensuring the title is free of any liens.
Potential cost: $1,000 to $3,000 or more.
Mortgage Discharge Fees
Lenders may charge a fee for closing out your mortgage.
Potential cost: $200 to $500.
Mortgage Pre-Payment Penalties
If you pay off your mortgage before the end of your term, pre-payment penalties may apply.
Potential cost: 3 months’ interest or the Interest Rate Differential (IRD).
Repairs and Maintenance
Any repairs or maintenance agreed upon with the buyer should be completed before the sale closes.
Closing Costs When Refinancing a Home
Appraisal Fees
When refinancing, the lender typically requires a property appraisal to determine its current market value.
Potential cost: $300 to $600 or more.
Legal Fees
Similar to a home purchase, a lawyer or notary will handle the paperwork and registration of the new mortgage.
Potential cost: $1,000 to $3,000 or more.
Mortgage Discharge Fees
Your current lender will charge a fee to close out your existing mortgage.
Potential cost: $200 to $500.
Title Insurance
A lender may require title insurance to cover any title-related issues during refinancing.
Potential cost: $150 to $500 or more.
Mortgage Pre-Payment Penalties
If you are refinancing before your current mortgage term ends, you may incur pre-payment penalties.
Potential cost: 3 months’ interest or the IRD.
Get Expert Help Today
Understanding the closing costs associated with buying, selling, or refinancing a home is essential to avoid financial surprises. By budgeting for these expenses, you can make the process smoother and more predictable.
If you’re considering a real estate transaction, feel free to reach out for personalized advice and guidance. I work with a network of top professionals, including Realtors, lawyers, notaries, and inspectors, and can connect you with the right experts to determine the exact costs for your situation.
Get in touch today to start planning your next real estate move!
Please contact Broker Donna Bulika for advice on selling or purchasing real estate in Toronto and to book your private consultation by filling out the form below or calling/texting at 416-797-6226, or emailing sold@donnabulika.com
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With a significant rate cut, we’re already seeing more buyers actively searching for their dream home. This early activity points to a busy and competitive spring market next year!
If you’re considering selling, now is the time to tackle those small improvements or unfinished projects around the house. These minor updates can make a big difference in attracting buyers and maximizing your home’s value.
I’ve just shared a new blog post on how simple DIY projects can elevate your home and get it ready for showings. Check it out and get a head start on prepping your home!
📖 [Read the blog: link in bio]
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