Buying a home, whether in Peterborough or elsewhere in Ontario, involves more than just the down payment. There's a collection of additional expenses known as closing costs that you'll need to pay on or before your closing date. These can add up significantly, typically ranging from 1.5% to 4% of the purchase price, so it's crucial to budget for them from the outset.

Here's a breakdown of common mortgage closing costs in Ontario:

1. Land Transfer Tax (LTT)

This is one of the largest closing costs and is a provincial tax levied by the Ontario government when a property changes ownership.

• How it's calculated: The LTT is a tiered tax based on the purchase price of the home.
  • 0.5% on the first $55,000
  • 1.0% on amounts exceeding $55,000 up to $250,000
  • 1.5% on amounts exceeding $250,000 up to $400,000
  • 2.0% on amounts exceeding $400,000
  • 2.5% on amounts exceeding $2 million (where the land contains one or two single-family residences)
• First-Time Homebuyer Rebate: As a first-time homebuyer in Ontario, you are eligible for a rebate of up to $4,000 on the provincial Land Transfer Tax. This can significantly reduce or even eliminate the LTT for properties under a certain value.

2. Legal Fees and Disbursements

You'll need a real estate lawyer to handle the legal aspects of your home purchase.

• Legal Fees: These cover the lawyer's professional services, including preparing and reviewing documents, conducting title searches, registering the property in your name, and ensuring a smooth transfer of ownership. Fees typically range from $1,000 to $3,000+ plus HST, depending on the complexity of the transaction and the law firm.
• Disbursements: These are out-of-pocket expenses paid by the lawyer on your behalf, such as:
  • Title Search Fees: To ensure there are no existing claims or liens against the property.
  • Government Registration Fees: For registering the transfer of title and mortgage documents.
  • Execution Searches: To ensure there are no judgments against the buyer or seller.
  • Courier Fees, Photocopying, etc.

3. Mortgage Default Insurance Premium (CMHC/Sagen/Canada Guaranty)

If your down payment is less than 20% of the home's purchase price, you'll be required to pay for mortgage default insurance (often referred to as "CMHC insurance," though there are other providers like Sagen and Canada Guaranty). This protects the lender in case you default on your mortgage.

• How it's calculated: The premium is a percentage of your mortgage amount, and it varies based on the size of your down payment (the smaller the down payment, the higher the premium). It can range from 0.6% to 4.0% of the mortgage principal.
• Payment: The premium is typically added to your mortgage principal, meaning you don't pay it upfront in cash. It increases your overall loan amount and, thus, your monthly payments. There is also an 8% provincial sales tax (PST) on the premium, which is usually paid upfront at closing.
• Not required: If you have a down payment of 20% or more, this insurance is not required, allowing you to avoid this significant cost.

4. Title Insurance

This protects you and your lender against losses arising from defects in the property's title (e.g., fraudulent sale, existing liens, unknown easements, boundary disputes).

• Cost: It's a one-time fee, typically ranging from $250 to $500, depending on the property value and coverage. While not always mandatory, it's highly recommended and often a requirement by lenders.

5. Property Appraisal Fee

Your mortgage lender will likely require an appraisal to confirm the market value of the property you're buying. This ensures the home is worth at least the amount you're borrowing.

• Cost: It typically ranges from $300 to $700. Sometimes, the lender covers this, but often, it's the buyer's responsibility.

6. Home Inspection Fee

While optional, a home inspection is highly recommended to uncover any potential issues with the property (e.g., structural problems, roof issues, electrical or plumbing defects) before you finalize the purchase.

• Cost: Generally ranges from $300 to $600 or more, depending on the size and age of the home. This upfront cost can save you thousands in unexpected repairs down the line.

7. Property Tax Adjustments

On closing day, property taxes (and sometimes other utilities like water) will be "adjusted" between the buyer and the seller. If the seller has prepaid taxes for a period after the closing date, you will owe them the portion covering your ownership. If the seller has not paid taxes up to the closing date, they will owe you that portion.

• How it's calculated: Your lawyer will determine the daily rate of the property taxes and calculate the exact amount owed by either party based on the closing date. This adjustment ensures both parties pay their fair share of the annual property tax.

8. HST/GST on New Homes

If you are buying a newly constructed home (not a resale), you will pay HST (13%) on the purchase price.

• Rebate: For eligible new homes, there's a New Housing Rebate available for a portion of the HST paid, especially if the purchase price is below $450,000. Builders often factor this rebate into the list price, but it's essential to confirm. Resale homes are generally exempt from HST.

9. Utility Connection/Setup Fees

You may incur small fees for setting up new utility accounts (hydro, gas, water, internet) in your name.

10. Moving Expenses

While not strictly a "closing cost," don't forget to budget for moving expenses, whether you're hiring professional movers or renting a truck.

Budgeting for Closing Costs in Peterborough (and Ontario)

As a general rule, aim to save an additional 1.5% to 4% of the purchase price on top of your down payment to cover these closing costs. For example, on a $500,000 home in Kawartha Lakes:

• Down Payment: $25,000 (5%) to $100,000 (20%)
• Closing Costs: Anywhere from $7,500 to $20,000.

Key Takeaways for Budgeting:

• Start Saving Early: Begin saving for closing costs at the same time you're saving for your down payment.
• Get a Detailed Quote: Your real estate lawyer will provide a "Statement of Adjustments" or a detailed breakdown of all expected closing costs before closing.
• Work with Professionals: Your mortgage broker and real estate lawyer can help you estimate these costs accurately for your specific situation.

Understanding and preparing for these additional expenses is vital for a smooth and stress-free home purchase process in the Kawarthas.