Closing Costs for a Purchase or a Refinance
IMPORTANT: Not all these charges may apply to your situation. This is to be used as a guideline so you are aware of what possible additional mortgage closing costs could be presented a few days before closing your mortgage that need to be paid over and above the price of the property or mortgage you are taking out. Your lawyer will give you the final costs and amounts.
|For both Purchase and Refinance||Purchase||Refinance|
|Property Appraisal||Property Inspection||Mortgage Penalty|
|Mortgage Insurance||Land Transfer Tax|
|HST on Mortgage Insurance|
|New Construction Builder Costs|
In order to satisfy the mortgage lenders of the market value of the properties, a property appraisal is done by an independent property Appraiser. The appraisal fee is generally paid directly to the appraiser by the borrower and the cost for residential property appraisals can range from $75 to $125 for a drive-by appraisal and to between $250 to $450 for a full appraisal. These costs vary between locations and types of properties. Mixed-Use and Commercial appraisals cost a lot more. Not all banks call for appraisals and some will refund the costs.
Although this cost can be paid on closing, most people add it to their mortgage.
For any mortgages where the Loan to Value (LTV) is over 80%, the mortgage is a High Ratio Mortgage and needs to be insured to protect the mortgage lender in the event you default on your payments. This mortgage loan insurance is legislated by the government and is insured through either Canadian Mortgage and Housing Corporation (CMHC), Genworth Financial or Canada Guaranty. This is a once off cost. The amount of this insurance depends on the LTV - this table shows the Insurance Premium percentages for the Mortgage Loan Insurance:
|Loan to Value (LTV)||Premium (% of Mortgage)||Self Employed Premium|
|Up to 65%||0.60%||1.50%|
|Up to 75%||1.70%||2.60%|
|Up to 80%||2.40%||3.30%|
|Up to 85%||2.80%||3.75%|
|Up to 90%||3.10%||5.85%|
|Up to 95%||4.00%||N/A|
HST on Mortgage Insurance premium
Although the Mortgage Loan Insurance premium is added to your mortgage, the HST on that premium is payable up front and is part of your mortgage closing costs.
A lawyer is required to handle the paperwork in closing a property. They charge a fee for this professional service which can range anywhere from $450 to $950, depending on the complexity of your deal. Over and above this fee are additional fees the lawyer has to incur, such as property searches, courier's, stamps, faxes and even a recent Survey of the property if one is not available and is required by the lender, which can cost anywhere from $650 - $1,250. Most lenders will however accept Title Insurance which costs around $256. Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership.
In some cases, securing financing for a property can be complicated and requires a lot more work than an normal mortgage. Mortgage Brokers will then charge a Brokers Fee for the extra work. This fee is over and above the fee that the mortgage broker will get paid from the lender who the mortgage is placed with. Some brokers charge a fee on every deal. By law, if the mortgage is less than $300,000, that brokers fee cannot be paid upfront to the broker. A letter of direction needs to be completed, instructing the lawyer to pay the agreed upon broker fee when the mortgage closes. Mortgages over $300,000, the brokers fee can be paid upfront, prior to the mortgage closing.
COMMITMENT: My commitment to my clients is that if the mortgage lender is paying us a finder fee, no matter how small, we will not charge a brokerage fee. If the bank is not paying a finders fee and we need to charge a brokerage fee, the amount of the fee will be disclosed up front and I can assure you, it will be less than what typical mortgage brokers charge. I am more interested in a long term relationship through many mortgages, rather than trying to make as much off every mortgage.
New Construction Builders Costs
Your new construction purchase offer will itemize a number of expenses that will be charged on closing. It is very important that you get your lawyer to review the purchase offer and apply to get the builder to cap the costs.
A property inspection is for the protection of a home buyer. A Purchase and Sale Agreement is often subject to a Property Inspection acceptable to the buyer. A home inspector (make sure they have liability insurance in case they miss something) does a professional inspection of the property to ensure there are no issues with the property that need to be dealt with. A home inspection can range from $250 to $450, and generally well worth the investment.
Land Transfer Tax
Land Transfer Tax (LTT) is based on the purchase price of the property and is payable by the purchaser as part of the mortgage closing costs and is not added to the mortgage. First Time Home Buyers in Ontario get a tax rebate of up to $4,000. The bank will need to see that you have the full land transfer ready for closing even thought he lawyer will apply the rebate on closing.
|Mortgage Amount||LTT % of the Mortgage|
|Up to $55,000||0.5%|
|Exceeding $55,000 to $250,000||1.0%|
|Exceeding $250,000 to $400,000||1.5%|
|Mortgage Amount||LTT % of the Mortgage|
|Up to $55,000||0.5%|
|Exceeding $55,000 to $400,000||1.0%|
|Exceeding $400,000 to $2m||2.0%|
This is where it is so important you choose the right mortgage product. If and when you break an existing mortgage to refinance or sell, your existing lender will charge a penalty to do this. The amount of the penalty is dependent on a number of factors: Interest Rate currently charged in the mortgage, Time left to Maturity, current lending rates and the terms and conditions of the existing mortgage lender. Generally the penalty is the greater of 3 months interest or the difference between the Interest Rate Differential (IRD). All lenders calculate this differently and can let you have that amount at anytime by simply calling them. On a refinance, this penalty amount is generally added to the new mortgage. More details available on the Mortgage Interest Rates page.