Sale Closing Costs and Additional Fees

Initial costs associated with the actual purchase of a home can add up surprisingly quickly. It is important to consider the following costs so there may not be an unwelcome surprise on closing.

  1. Utility and Property Tax Adjustments

    These costs are payable, usually through the lawyer, when the sale is closed. Depending upon the scheduling of the vendor’s property tax and utility bill payments, the vendor may or may not incur these costs. If the vendor prepays these expenses then the purchaser can be expected to refund the difference to the vendor on closing. However, if the vendor does not pay these expenses in advance, the vendor will be required to pay the purchaser any amounts accrued prior to the possession date. The exact amount will be calculated by the lawyers involved with the sale of the home.

  2. Mortgage Prepayment or Discharge Fees

    The vendor should be forewarned that if they plan to pay off any mortgage on the property to be sold with its sale proceeds, the vendor’s bank may charge a fee for closing the mortgage account and a penalty fee if it is paid off early.

  3. Inspection Fee
  4. It is recommended the purchaser have an inspection performed by a professional building inspector before the offer to purchase is formalized. The inspection may bring to light areas where repairs or maintenance are required and serves to assure the purchaser that the house is structurally sound. Usually, the inspector will provide the purchaser with a written report. However, the purchaser should ask for one if the inspector did not do so voluntarily.

  5. Interest Adjustment Costs

    Interest adjustment dates can be a dramatically reduce your cash flow so please take note of your lender's policy. Most lenders expect the first mortgage payment one month after closing the purchase. However, if your closing date is during the middle of the month, some lenders expect the first payment at the beginning of the next month, two weeks before you would normally expect. In the alternative, the lenders may charge a pro-rated interest to make up the difference. When arranging your mortgage, ask how interest is collected up to the interest adjustment date. By asking the right questions, you can avoid a cash-flow crisis on closing.

  6. Land Transfer Tax

    Land transfer tax is calculated on the purchase price for the land and buildings, and is paid by the purchaser. Currently, the rate of land transfer tax is 1/2 of one percent on the first $55,000.00, an additional 1 percent on the amount between $55,000.00 and $250,000.00, and an additional 1 1/2 percent on the balance of the purchase price over and above the $250,000.00 threshold. Where the property contains one or two single family dwellings and the purchase price exceeds $400,000.00, the tax is 2 percent on the excess.

    There are several ways in which you may qualify for a refund of the land transfer tax paid. Consult with your lawyer to see whether you can qualify for such refund.

  7. Property Insurance

    All homes must have adequate insurance coverage against fire and other risks of loss, theft and liability. Your mortgage lender requires that you provide your lawyer with proof that your insurance is in place by the closing date.

  8. Moving Costs

    Whether the move into your new home is a do-it-yourself affair or you hire movers, there will be costs involved. If you plan to move during the peak spring/summer months, you should contact the service provider two to three months in advance if possible.