Closing Costs… Say, whaaaaat?

It’s a question we get asked allll the time: how much money will it cost to buy a house.  Like, how much money BEYOND the cost of the house.  You know… all those ‘hidden expenses’ that people don’t tell you about!?

Your Realtor should do their part to educate you on the secondary costs that you will incur.  If you’re a first time buyer (and even if you’re not!), these expenses can add up significantly, and cause frustration and stress if you’re not properly prepared.

The big one: Lawyer’s fees.  These will vary from lawyer to lawyer, but count on anywhere from approximately $1000-$1700 for your disbursements.  This takes care of the paper pushing and processing that your lawyer will do on your behalf – everything from searching the title of the property to ensure there are no undischarged mortgages, liens, work-orders (anything prohibiting the legal transfer of ownership), to registering you as the new owner, corresponding with the Seller’s lawyer, securing necessary legal insurance, and preparing the necessary paperwork related to all these tasks.  Other factors will also impact this cost such as whether there is a lender involved or whether your purchase is a condominium (which requires obtaining and reviewing a ‘status certificate’ – the document outlining the well-being of the condo corporation and its finances).  The lawyer’s role is an important one, and ensuring that you are represented in this capacity is imperative to ensuring a smooth transition to your new property.

Land Transfer Tax: If you’re a first time Buyer, it’s your lucky day – you will be granted a rebate of $2000.  Otherwise, you will be subject to pay tax which is charged based on the price of the property.  You can calculate the tax HERE.

Commission:  Your Realtor likely discussed commission with you at the time you signed a Buyer Representation Agreement.  Often, the commission is paid directly by the Seller.  However, if there is a discrepancy between the commission offered by the Seller and the amount agreed upon between you and your Realtor, further discussion could be necessary to work through these details.  From a Seller’s perspective, the commission agreed upon in the listing (plus HST) will be an additional cost to work into your bottom line.

Most lenders will require proof that you have funds to cover the essential and non-negotiable expenses at the time of a financing preapproval – 1.5% of the purchase price of your home is often the amount that must be accessible cash to use for these purposes.  In other words, you can’t borrow this money (without jumping through a few hoops), or expect to use credit to cover these costs.  Some lenders do a fantastic job of explaining everything under the umbrella of ‘finances’ when it comes to purchasing a home – including closing costs…. However: others, although they may have to account for these costs, don’t always educate their clients about what exactly is needed – so be sure to give yourself a buffer and save accordingly so you don’t come up short.

Beyond the ‘big items’, there are some other expenses to consider.  They’re smaller in the grand scheme of things, but hey – it all adds up!

  • Home inspection – approximately $300-$400, paid at the time of the inspection
  • Utility registration – if you have never held accounts with service providers such as Union Gas or London Hydro, a deposit is often required to stand as collateral should you default on a payment. A letter proving good credit often helps to alleviate some of these expenses.
  • Moving fees – this expense ranges significantly, and depends on various factors including how many items are required to be packed/moved, the size of the crew involved, distance from location ‘A’ to ‘B’, and company involved.

Once you’ve moved in, it isn’t unlikely that there will be addition expenses, especially within the first year of ownership.  Many of these can be preferential, though some might be unavoidable:

  • Appliances
  • Furnishings
  • Renovations/Upgrades
  • Décor (window treatments, art, bathroom linens, area rugs)
  • Lawn and seasonal tools (shovels, garden equipment, snow removal tools
  • Seasonal furniture

Purchasing a new home can be exciting – it is a great venture towards building credit, financial freedom, and personal equity.  But it does come with a price.  And this doesn’t mean you should avoid the process, but it is extremely helpful to be aware of what to expect in order to avoid any shocking surprises when the time comes to sign on the dotted line.  Please don’t hesitate to let us know if you have questions about these costs.  If we can help to navigate you through the process of purchasing a property in the London area, please give us a call – it would be our privilege to help you along the way to make for a turbulent-free and rewarding endeavor!

Educating our clients is an important part of our job that we take seriously.  If the thought of home ownership is new to you and you’re looking for some ‘first steps’ on how to get started, check out our website for some great information – it is full of resources to educate and inform you about the process of purchasing a home.