Don’t Forget About Your Closing Costs!

The below is a guest post By MyClosingCosts.ca – a brand new service to help home buyers calculate their closing costs

Although the move-in date for your pre-construction condo may be a couple of years away still, it’s a good idea to start budgeting now for the additional costs you’ll be faced with on your closing date. You don’t need to make a traditional down payment, because of how your pre-construction financing works, but you still have to pay all of the other closing costs buyers face, as well as some that are specific to new home purchases only. Here is a breakdown of some of the most common closing costs faced by pre-construction buyers.

Home Inspection

Just because you’re buying a new condo, that doesn’t mean you don’t need to get a home inspection. While there are likely no major structural issues, home inspectors have been known to find issues with the plumbing of bathroom fixtures, kitchen sinks, garburators, etc. as well as electrical outlets that are not hooked up. By taking note of these issues before you close, you can ask the builders to fix anything before you move in. You should budget up to $500 for a home inspection on your condo.

Legal Fees

Whenever you’re buying a home, it’s important to work with an experienced real estate lawyer who can facilitate the transaction. Before you move into your new condo, it’s your lawyer’s responsibility to get title insurance in place, register all documents in your name, calculate and issue cheques out to cover your closing costs, and protect your rights along the way. You can expect to pay at least $1,500 for legal fees and disbursements.

Land Transfer Tax

Almost every Canadian who purchases a home is subject to paying land transfer tax on it – except those in Alberta in Saskatchewan, where the provinces instead levy a much smaller fee. But buyers in Toronto are faced with a double whammy, when it comes to land transfer taxes, as they have to pay both the Ontario land transfer tax and the Toronto land transfer tax. Because the amount you pay is based on the price of your new condo, land transfer tax is often the most expensive closing cost.

HST

When you buy a new condo or home in Toronto, you have to pay HST (harmonized sales tax) on it; that means you’re adding an additional 13 per cent to the purchase price. You may, however, purchase into a project where the builder has already added the HST into the price; they may even say that they will cover it on their own. Just remember to ask and receive confirmation from the person selling you your unit, whether or not you have to save up and pay for HST yourself. And when it comes to tax time, fill out Form GST190 and see if you’re eligible for a rebate of any of the GST portion!

New Home Warranty Fees

One of the major bonuses of buying into a new project is that everything comes with a warranty – at least for a certain number of years. Unfortunately, you have to pay a fee to activate this warranty. In Ontario, the Tarion Warranty enrollment fee is $1,000 and it protects buyers from having to pay for any repairs, should the builder default or fail to build to standard. Much like the HST, some builders may include this fee in your purchase price, so ask before you buy.

These are just some of the most common closing costs a pre-construction condo purchaser may come across, but there are others to consider. You may need to pay a number of utility hook-up fees, for hydro, gas, cable, etc. And, it’s unlikely that you’re putting down less than 20%, but doing so would mean you’d have to purchase CMHC insurance. And, in Ontario, you’d also need to pay PST on that CMHC insurance. Our hope with this post is that you’ll be aware of all of the extra costs that could come up before you move into your new condo, so you can budget ahead of time and be prepared to pay for them along the way.