Frank Salvatore

Closing Costs & Legal Terms

Title Search
ensures that clear title can be transferred $250 – $300
Title Insurance
protects the buyer against losses that occur when title to a property is not free and clear of defects $250 – 300
Land Transfer tax
a tax imposed by the Ontario government when title is passed
www.fin.gov.on.ca
SEE LINK
Home Inspection
helps to identify any issues with the property being purchased $300 – 500
Survey
Completed by an Ontario Land Surveyor that outlines the boundaries, structures and measurements of the property. $750 – 1500
Lawyers Fees
the fee your lawyer charges for closing the Real Estate transaction $900 – 1500
Home Energy Audit
Legislation imposed when selling a home to ensure the home is “energy efficient”. (Rebates are granted for improvements made)
www.homeperformance.com
$350 + 500
Appraisal Fee
Appraisals to the purchased property are often required by the lender to ensure that the purchaser paid fair market value. $250 – 400
Disbursements
Out of pocket expenses that your lawyer charges you for expenses that are incurred. E.g. registrations, hydro, water and gas. $200 – 400
Status Certificate Condominium
Condo documents that outline the rules and regulations, budgets, reserve funds and any past or pending litigation’s affecting the condo corp. $100-$200
 What is a Latent Defect?
A latent defect is a fault in the property that could not have been discovered thorough a typical inspection. In other words it would have been hidden in a way that may have only been found through more investigative means which most sellers would not allow. (tearing down walls etc)  The buyer in this case may have a claim against the Seller or Representative if there was knowledge of the defect and was not disclosed to the buyer.
What is a Patent Defect?
A patent defect is a fault that could have been identified through a thorough Inspection and could have easily been discovered and not found until after closing. These types of defects may be much more difficult to make a successful claim unless the seller took steps to hide the defect from a normal inspection.
CMHC Premiums
Canada Mortgage Housing Corporation requires all home purchases with less than 20% to be insured against default of payment. www.cmhc.schl.gc.ca
Loan-to-Value Premium on Total Loan Premium on Increase to Loan Amount for Portability and Refinance
Standard Premium Self-Employed without 3rd Party Income Validation Standard Premium Self-Employed without 3rd Party Income Validation**
Up to and including 65% 0.50% 0.80% 0.50% 1.50%
Up to and including 75% 0.65% 1.00% 2.25% 2.60%
Up to and including 80% 1.00% 1.64% 2.75% 3.85%
Up to and including 85% 1.75% 2.90% 3.50% 5.50%
Up to and including 90% 2.00% 4.75% 4.25% 7.00%
Up to and including 95% 2.75% 6.00% 4.25%* *
90.01% to 95% —
Non-Traditional Down Payment***
2.90% N/A * N/A
Extended Amortization Surcharges
Greater than 25 years, up to and including 30 years: 0.20%
Greater than 30 years, up to and including 35 years: 0.40%

 

Qualifying

It is important for buyers to understand how to qualify to buy a property when arranging for a mortgage. Lenders first look at the Buyer’s credit score. The higher it is the more secure a lender is that the debt will be paid. 650 and above will help a buyer obtain the best rates. Secondly the lender requires that the amount borrowed does not exceed the GDS and TDS ratios.

GDS RATIO (Gross Debt Service Ratio):

The percentage of gross annual income required to cover payments associated with housing. Payments include mortgage principal, interest, property taxes and sometimes include secondary financing, heating, condominium fees or pad rent. (Usually calculated at 32% of gross income)

TDS RATIO (Total Debt service ratio):

The percentage of gross annual income required to cover payments associated with housing and all other debts and obligations, such as car loans and credit cards. (Usually calculated at 40% of gross income)

 

First Time Home Buyer Incentives

 

Land Transfer Tax Refund

The amount of the refund claimed will (if granted) offset the land transfer tax payable. The maximum amount refundable is $4,000.

Examples:

Cost of Home Tax Payable Tax Refund Net Tax Payable
$300,000 $2975 $2975 $0
$600,000 $8475 $4,000 $0
$1000,000 $16475 $4000 $12,475

There is no interest paid on this refund.

RRSP Contributions

The government has raised the amount that can be withdrawn from an RRSP form $20,000 to $25,000.

 

Closing Cost Credits

First time home buyers can obtain a credit of $750 towards the closing costs of their first home purchase.

Cash Back Options

Some lenders are now offering 5% cash back options to first time buyers to be able to be used towards a down payment, closing costs, home furnishings, etc.

HST

On July 1, 2010, the federal Government administered the Harmonized Sales Tax (HST) that applies to most purchases and transactions.

The HST applies to newly constructed homes and will not apply to resale homes.  Buyers of new homes will receive a rebate of up to $24,000 regardless of the price of the new home.

Although the HST is not applicable directly to the Purchase Price of Resale homes it does apply to all the service fees associated to the Sale of the property. This includes Real Estate fees, Lawyer Fees, Home Inspection fees, Home Audit fees, Appraisal Fees etc.

To Learn more about the HST click www.rev.gov.on.ca/en/taxchange/homebuyers.html.

Please note the above costs apply to residential sales only and may vary due to individual circumstances and are subject to change.

Frank Salvatore