Preparation is key to being competitive in a sellers market

If you’re considering buying a house in Guelph, you’re going to find that the journey is an exciting one! But being prepared for the costs that can arise, beyond just the down payment will help make it an easier, less stressful journey. 

You’ve likely heard of closing costs, but what exactly does that mean?

Closing costs include all legal and administrative expenses you’ll be responsible for paying in order to finalize the sale of your home in Guelph. It’s important to include these costs in your budget because they often can’t be rolled into your mortgage payments. Closing costs can range anywhere from 1-4% of the actual home’s price, depending on the specific property you plan to purchase

Here are 10 common closing costs to help you calculate your expenses and better prepare for your purchase:

1 Land Transfer Tax

Whenever you buy property, you must pay a Land Transfer Tax (LTT). The LTT is a provincial tax in Ontario. The

amount you pay depends on the province you live in and the value of your new home. Rates typically range between 0.5% and 2% of the home’s value. This can add thousands of dollars to your purchase price. As a first-time buyer in Ontario, you’re eligible for rebates on your LTT and more information can be found here.

2 Appraisal Fee

Your lender may ask you to have the home appraised to confirm its market value. An appraisal is an unbiased estimate on the value of your home that certifies the property’s resale value to the lender in case you default on your mortgage.

3 Legal Fees and Disbursements

A lawyer or notary will help protect your interests by reviewing your purchase agreement, searching the property title and ensuring that all documents are completed properly in order to help you close on your new home. The amount of the fee will depend on the individual that you use, as well as your location. 

4 Home Insurance

Your lender will require proof that the property is insured in case of fire and other damage. Insurance costs vary widely, depending on the coverage needed and the chosen deductible. Be sure to get multiple quotes to find a competitive rate. You may also benefit from bundling policies together, including your automobile insurance. 

Keep in mind that Guelph insurance companies will require information on the home such as age of major components (roof, plumbing, electrical, heating system, water system, air conditioning) and depending on the age, condition and materials this could impact rates and coverages. Be sure to work with a Realtor who can answer these questions for you.

If you’re purchasing an older home such as downtown Guelph homes, you should be aware of potential insurance issues with knob and tube wiring, asbestos, galvanized steel and termites. In many cases, home inspectors can help with identifying these issues.

5 Home Inspection

While not mandatory, a home inspection is a wise investment as a home inspector has access to areas of a home you wouldn’t, along with tools that the average person doesn’t carry. What’s the cost of a home inspection? Budget roughly $500. A third- party, professional inspector will offer an objective visual examination of the physical structure and systems within a house, ensuring you’re making a wise purchase by outlining recommended repairs based on urgency. 

In a sellers market, many Guelph home buyers will forego a home inspection in order to make their offer more attractive. However, it doesn’t always have to be so black and white- if savvy, your Guelph Realtors can suggest strategies that may allow you to get that inspection (pre-offer home inspection, shortened inspection condition, offering a premium price to offset a condition).

6 GST/ HST on residential homes

Tax is charged on new residential homes. On Guelph homes for sale which are already built, tax is included in the purchase price. If the home you’re purchasing in Guelph is less than $450,000 and will be your primary residence, you may be eligible for a partial rebate. Contact your lawyer or notary for full details.

7 Statement of Adjustments

Your lawyer or notary will calculate and prepare a statement of adjustments for your portion owing

on utilities, property taxes and other bills based on where your closing date falls within the month/ payment cycle.

8 Mortgage Default Insurance

When you make a down payment of less than 20%, it is a regulatory requirement that your

mortgage be insured against default with a mortgage insurer. This insurance protects the lender in case of default, and the cost is passed on to the buyer. You can roll this insurance cost into your mortgage, but the tax is due at closing. 

9 Title Insurance

Most lenders require title insurance to protect you against fraud and problems with your property

title or survey. This is purchased through your lawyer or notary.

10 Moving Expenses

Finally, don’t forget the cost of hiring a Guelph moving company. Unless you plan on your friends and family helping (always buy pizza and beer as a thank you!), make sure you vet any movers carefully, as they are not all equal in price or service! Ask your Realtor for recommendations of Guelph moving companies.

Information for this blog post was provided by Jonathan Williams, Mortgage Agent with Integrity Tree Financial. You can reach him at 905 580 7089 or by email at jonathanwilliams@integritymortgages.ca for all your mortgage needs.