Understanding Closing Costs In Canada When Buying a Home

Understanding Closing Costs

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Closing costs in Canadian finance laws can be a complicated subject. Many potential homeowners who are shopping for a new home will underestimate what the total costs may be. However, closing costs will inevitably begin to appear when the property is ready to be purchased.

Closing costs are split into two very specific categories. These categories are recurring and non-recurring closing costs. They are exactly what they sound like. A recurring closing cost is a cost that must be paid continually even after the property is purchased. A non-recurring closing cost is a one-time payment. Both types of payments will need to be made in order to own a home.

Recurring closing costs

One great example of a recurring closing cost in Canada is homeowner insurance. This is something that must be acquired and paid for on a regular basis. Unfortunately, you cannot purchase homeowner insurance once and then forget about it. Payments are continual and that is exactly what defines a recurring closing cost.

Another great example of a recurring closing cost is property tax. Property tax also requires a continual payment long after the home is purchased. Many recurring costs never go away, either. They continue to require regular payments as long as you own the property. When shopping for a home, it is wise to get a full understanding of what these continual costs may be so that you are not shocked when they suddenly appear.

Non-recurring closing costs

Non-recurring closing costs only require a single payment. These costs can be the most disheartening at first, because they are very intimidating to a new homeowner, but once they are paid for, they can be forgotten.

Some examples of non-recurring costs include legal fees, moving costs, appraisal fees, credit reports and flood monitoring. A flood monitoring fee is only necessary once when a home is purchased. This pays for an inspection to determine whether or not the home is located in a dangerous area. Specific flood zones are remapped occasionally and an inspection will usually be required when a home gets a new owner.

A credit report can also be considered a non-recurring fee. This fee is typically very minor, but is required before the purchase of a home. Most credit reports cost well under $100.

“When calculating closing costs, assume you will need an additional 1.5% to 2.5% of the purchase price to cover such things as the home inspection, legal fees, land transfer tax, property tax, property insurance, utility hook-ups and moving costs,” said Chris Kiskunas, a regional sales manager at the Royal Bank of Canada.

The closing costs and the home seller

In certain instances, that the home seller may offer to cover the closing costs of a home as an incentive when selling, which bodes well for you. This can alleviate some of the stresses that can with homebuying, but be vigilant nonetheless and ensure that everything gets taken care of in the proper manner.

If you’re l0oking for a new home, visit ComFree.com today and sign up for our e-mail alerts to know when your dream home comes on the market.

1 comment

  1. michael@michaelhachem.com says:

    Something that people usually don’t think about is the cost of getting a real property report. It might not be the most expensive report to get but still an expense that you should know about.

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