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 |
n/a |
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.
|