Closing Costs For Foreign Buyers Purchasing Toronto Real Estate
The closing date is the day when the property is transferred to the new owner and as a foreign buyer you do not need to be physically present in Toronto for the closing of the transaction. Closing costs are the additional expenses associated with buying a house or condo over and above the actual purchase price of the property.
The greatest closing costs when buying a property in Toronto will be Taxes.
Also Land Transfer Tax (LTT) will be applicable and it is a one-time fee based on a percentage of the purchase price of the property.
All buyers, whether local or foreign, that purchase real estate in Toronto are required to pay two Land Transfer Taxes - one to the province of Ontario and one to the City of Toronto. A purchase of a $1M home or condo in Toronto translates into approximately $32,950 owing in Land Transfer Tax. A simple way to determine the approximate amount of funds you will need to set aside for land transfer tax is to use this Land Transfer Tax Calculator.
If you are buying a new house or condo from a builder, or buying a house that has been extensively renovated, the Harmonized Sales Tax (HST) of 13% will apply. Buyers of new homes and condos can apply for federal and provincial government rebates to offset portions of the HST. The HST does not apply on the purchase price of resale homes and condos. Also a buyer does not pay Land Transfer Tax on the HST portion of the purchase price.
It is necessary to retain a lawyer when buying property in Toronto. Normally they do not get involved in the buying process until the property has been secured through the Agreement of Purchase and Sale. The lawyer then reviews the terms of the Agreement, ensures the Buyer’s funds for the sale are paid to the Seller and registers the Buyer as the new owner on title. Legal costs can vary widely but one should budget approximately $1,500-$2,000 in legal fees per transaction.
If you are purchasing a house you may want to do a home inspection. A home inspection can indicate if something in the house is not working properly, needs to be fixed or replaced or is unsafe. Depending on the size of the house a home inspection can cost anywhere from $400-$800.
For a condo purchase, your lawyer will want to review the condominium documents known as a Status Certificate which includes the by-laws, financials, and declaration of the condo building. The cost of purchasing a Status Certificate is $100-$150 depending on how fast you want to get it.
If you are getting a mortgage on the property, the lender may require an appraisal. This is an evaluation of the property’s value that lenders use to determine the amount of funds they will lend to you to finance the property. This cost is usually paid by the Buyer and varies greatly depending on the property but one should budget for approximately $500.00 per appraisal.
Other Closing Costs
Property insurance – it provides protection against risks such as fire, theft and weather damage. A lender will not grant a mortgage without property insurance.
Moving costs - rates may be higher during the winter months, on weekends and at the end of the month in Toronto. It may be easier and cheaper to buy new furniture in Toronto rather than have it shipped across long distances or from other countries.
Interest adjustment costs between the date of closing and the first mortgage payment
Service charges for utility hook-ups such as phone, gas, electricity and internet.