Newmarket Real Estate Realtor for Busy People™

Home Buyer Closing Costs


Closing Cost Challenge for a First Time Home Buyer

  • Saving the minimum 5% downpayment

is not the biggest challenge for those struggling to buy their first home.

  • Other closing costs add 6-7%

of the purchase price to the cash required for the closing.

  • Home purchase cash requirements is closer to 12%

to allow for those "tbd" (to be determined) items in the table below: adjustments at closing, moving costs and after closing costs like new furniture, lawn mower, and maybe food for the table.

 

What is the Solution if you do not have 10% or more of the home price in savings?

  • Buy a more modest home and/or buy in a less expensive location. Usually the best option.
  • Start a RRSP early on so you can borrow from yourself thru the Home Buyer Plan (HBP) - may take a few years if you are starting from scratch.
  • Get help from your family - must be a gift, not a loan.

 

I'm here to help you:

Contact me to discuss how you can create a budget for your home purchase that takes into account your circumstances and opportunities and dreams for a new home currently and looking ahead a few years. Then, you can get into buying a home with confidence.

 

 

Typical Closing Costs

Example: $400,000 Home

FTHB = First Time Home Buyer

Items to Consider

FTHB         

Not FTHB

 FTHB      

  Not   FTHB

 


Toronto

Toronto

Not in
Toronto

Not in
Toronto
Lawyer Fees including disbursements 1,200 1,200 1,200 1,200
Adjustments (seller pre-paid eg; taxes) tbd tbd tbd tbd
Penalty closing out any current mortgage n/a tbd tbd tbd
Title Insurance (detached home- $250; condo - $100) 250 250 250 250
Home Inspection (needed at purchase) 300 300 300 300
Land Transfer Tax Provincial   4,475 4,475 4,475 4,475
FTHB Land Transfer Tax Credit - Provincial (2,000)   (2,000)  
Land Transfer Tax City of Toronto 3,725 3.725    
FTHB Land Transfer Tax Credit - Provincial (3,725)      
Total Net Land Transfer Tax 2,475 8,200 2,475 4,,475
Downpayment - 5% 20,000 20,000 20,000 20,000
CMHC Insurance Premium (included with Mortgage) 13,680 13,680 13,680 13,680
CMHC Insurance Premium + Ontario Sales Tax - 8%* 1,094 1,094 1,094 1,094
Moving tbd tbd tbd tbd
Re-key Locks 100 100 100 100
Total (not including tbd items, excluding CMHC premium) 25,000 31,000 25,000 41,000
% of Purchase Price 6% 8% 6% 7%
Total (not including tbd items, including CMHC premium) 39,000 45,000 39,000 41,000
% of Purchase Price 10% 11% 10% 11%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* Ontario charges PST on mortgage default insurance. In Ontario this tax is 8% of the CMHC insurance premium, and must be paid in full when your house closes. The PST is therefore different from the premium as it is not added to your mortgage balance.

You may choose to pay the CMHC premium at time of closing and not add it to your mortgage saving a good deal of interest over time.


CMHC Mortgage Insurance Tips


See Chart Below for Details.

1. At 20% down, there is no premium owed.

2. Notice how the premiums are lowered by steps. Do what you can to reach the next lower cost bracket. For a few dollars more you could save hundreds. See the table with an example at the bottom of this page.

3. You can choose to add the premium into your mortgage but you cannot finance the 8% Ontario Provincial Sales Tax owed on the premium - the PST must be paid at closing.

Note: The CMHC calculator below does not take into account the PST amount that is due on closing.


TIP to Save You Money on CMHC Insurance Premium


Loan to Value % Down $ Down ($100K) CMHC % CMHC $ PST Total Fee
95% 5% 5,000 3.60 3,420 274 3,694
89.9 % 9.99 % 9,990 3.60 3,240 259 3,500
90 % 10 % 10,000 2.40 2,160 173 2,333
85 % 15 % 15,000 1.80 1,530 122 1,652
80 % 20% 20,000 0.0 0 0 0

 

 

 

 

 

 

 

Please note the example of paying  up to 9.99% down vs paying the next Loan to Value bracket of 10 % down. By being that small amount short ($10 in this example) you would have paid $1,167 extra on a $100K property value. You would lose a multiple of this in any deal, e.g.; you would loss $5,835 (5 x $1,167) financing a property at $500K if you put 9.99% down instead of 10%.

Don't worry, I watch out for this kind of detail for you!


CMHC Mortgage Insurance Guidelines and Premiums


How Much Does CMHC Mortgage Loan Insurance Cost?

To obtain CMHC Mortgage Loan Insurance, lenders pay an insurance premium. Typically, your lender will pass these costs on to you. Your lender will give you the exact price when you apply for a mortgage.

The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on the size of your down payment. The higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums.

 

Loan-to-Value Premium on Total Loan
Standard Premium
Up to and including 80% 1.25%
Up to and including 85% 1.80%
Up to and including 90% 2.40%
Up to and including 95% 3.60%
Extended Amortization Surcharges
 

Premiums in Ontario  are subject to provincial sales tax of 8%.

 

The provincial sales tax cannot be added to the loan amount and must be paid at Closing.


Notes


Although mortgage default insurance costs homebuyers 1.80% - 3.60%1 of their mortgage amount, it is actually beneficial to the buyer market. Without it, mortgage rates would be higher, as the risk of default would increase. Lenders are able to offer lower mortgage rates when mortgages are protected by mortgage default insurance, because the risk of default is passed along to the mortgage insurer.

On July 9, 2012, the Canadian government made two key changes to mortgage default insurance regulation:

  • Mortgage default insurance is not available on homes purchased for more than $1 million; this means that a 20% down payment is required on these homes.
  • The maximum amortization period offered on insured mortgages is 25 years.

     

On May 1, 2014, the Canadian government increased mortgage default insurance premiums by approx. 15%.

On June 1, 2015, the Canadian government increased premiums for 5-9.99% down payments by approx. 15%.