Closing Costs for Purchase & Refinance

For Purchase and Refinance

  • Legal Fees
  • Property Appraisal Fees
  • Broker Fee
  • Mortgage Insurance
  • HST on Mortgage Insurance Premium

Purchase

  • Property inspection
  • Land Transfer Tax

Refinance

  • Mortgage Penality

It is important to note that all these charges may not apply to your situation. The above chart is to be used as a guideline so you are aware of what possible additional costs would be on the day of mortgage closing over and above of the price of the property or the mortgage. Your lawyer will be able to give you the actual costs and amounts.

Bank’s would like to see at least 1.5% of the value of the property available for closing costs.

1.Legal Fees: There are legal costs incurred to register the mortgage and these typically range from $800 to $1,200 and paid to the lawyer. In addition to the legal fees, there are additional disbursements and Land Title Insurance. So, budget for around $1,800 for the total of these fees.

2. Property Appraisal: A property Appraisal Fee paid to an independent appraiser who will value  your property for the lender. This fee ranges from $250 to $300 for residential homes.

3. Broker Fees: In some cases, securing financing for a property can be complicated and requires  a lot more work than a 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 agreed upon broker fee when the mortgage closes. Mortgages over $300,000, the brokers fee can be paid   upfront, prior to the mortgage closing.

4. Mortgage Insurance: A mortgage where the LTV is over 80% (65% for self-employed people)   the mortgage needs to be insured to protect the mortgage lender in the event you default on your payments. The cost of this insurance depends on the LTV and is added to your mortgage.

This mortgage loan insurance is legislated by the government and is generally insured through Canadian Mortgage and Housing Corporation (CMHC),  Genworth Financial or Canada Guarantee.

5. 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 cost. HST currently is 13%.

6. Property Inspection: A property inspection fee paid to independent inspector who does a  non- invasive, visual inspection of a building. 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.

7. Land Transfer fee: Land Transfer Fee is paid at the time of closing the mortgage and your solicitor will let you know the exact amount. The land transfer fee is based on the Purchase Price:

               Purchase Price                                                                    Tax Premium

  •   Up to and including $55,000                                                                     0.5%
  •   More than  $55,000  up to and including $250,000                                  1.0%
  •   More than $250,000 up to and including $400,000                                  1.5%
  •   More than $400,000                                                                                  2.0%

 

8.Mortgage Penalty – This is very important to consideration before you finalize your lender. You will end up paying a huge amount of penalty in case you get into a situation where you need to break the mortgage.

Why break your Mortgage? – You probably are not planning to break the mortgage at the time you sign for a mortgage. But as per the statistics most of the people will refinance or change their mortgage every 3 years. Some of the common reasons to break the mortgage include financial hardship, divorce, relocating and taking advantage of lower rates.

How does mortgage penalty work? – Mortgage penalties are different depending on whether you have a variable or fixed mortgage.With variable rate mortgage your mortgage penalty is often simply 3 month’s interest.

With a fixed rate mortgage, your penalty is usually the greater of 3 month’s interest and the Interest Rate Differential (IRD). Often times you end up paying a lot more. The IRD is a formula that takes into account the money lenders potentially lose when you break your mortgage.

The IRD formula is used to calculate what you are currently borrowing at and what the bank can re-lend it out at. The bigger the difference in the rates the higher the penalty would be. The bigger banks use the posted rate and not your actual rate to calculate the IRD which results in much higher penalties. For example, current posted rates for a 5 years term is 4.64% and actual rates are around 2.64%, so you are getting a discount of 2%. When they calculate the penalty, they use the higher posted rate (4.64%) for the interest difference for the remainder of the term and not your actual rate (2.64%). We look to place your mortgage with banks that use your actual rate.

You can avoid paying the penalty by porting (transferring) your mortgage to your new property or by doing a “Blend to Term” or a “Blend and Extend”. A blend keeps your existing rate on your mortgage and blends with the current rates to give you a new rate for the remaining term of your existing mortgage or into a new mortgage term. All a blend does is ensures the bank gets the rest of interest for the remaining term.

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Head Office: 2345 Wyecroft Rd, Unit 1, Oakville, ON, L6L 6L8