Closing Costs for Buyers in Toronto

As someone with experience in the Toronto real estate market, I understand that the process of purchasing a property can be overwhelming, especially when it comes to closing costs. In addition to the common closing costs such as land transfer tax, title insurance, legal fees, and appraisal fees, buyers may also encounter adjustments that can add to the overall cost of the transaction.

Adjustments in Real Estate Transactions

Adjustments are expenses that have been prepaid by the seller but are applicable after the closing date. These expenses are typically pro-rated between the buyer and seller based on the closing date. Adjustments are important to consider because they can add to the overall cost of the transaction.

Common Adjustments in Real Estate Transactions

• Property Taxes: Property taxes are annual taxes paid by the property owner to the municipality where the property is located. When a property is sold, property taxes are typically pro-rated based on the closing date. The buyer is responsible for paying their share of the property taxes from the closing date until the end of the year.
• Utility Bills: Like property taxes, utility bills such as electricity, gas, water, and other utilities are also typically pro-rated based on the closing date. The buyer is responsible for paying their share of the utility bills from the closing date until the end of the billing cycle.
• Condo Fees: If the property being sold is a condominium, the buyer may be responsible for paying a portion of the monthly condo fees. Condo fees are typically pro-rated based on the closing date and the buyer is responsible for paying their share of the fees from the closing date onwards.
• Rental Income: If the property being sold has tenants, the buyer may be entitled to receive rental income from the tenants. In this case, the seller will provide a statement of adjustments that takes into account any rental income that the buyer is entitled to receive.
• Repairs: If there are any outstanding repairs or maintenance that need to be done to the property, the cost of those repairs may be adjusted between the buyer and seller. For example, if the roof needs repairs, the cost may be deducted from the sale price or negotiated between the parties.
• Deposits: If the buyer has made a deposit towards the purchase of the property, the amount of the deposit may be adjusted on the closing statement.
• Home Warranty: If the property is being sold with a home warranty, the cost of the warranty may be adjusted between the buyer and seller.

These are some of the most common adjustments in real estate transactions, but there may be others depending on the specific circumstances of the sale. It’s important to work with a qualified real estate professional who can guide you through the process and ensure that all adjustments are properly accounted for.

Common Closing Costs for Buyers in Toronto

• Land Transfer Tax: The land transfer tax is a significant closing cost for buyers in Toronto, and it is calculated based on the purchase price of the property. The amount of land transfer tax payable depends on the value of the property and is payable to both the provincial and municipal government.
• Title Insurance: Title insurance is an insurance policy that protects buyers from any defects or problems with the title to the property. The cost of title insurance varies depending on the property and the level of coverage required.
• Legal Fees: Buyers will typically require a lawyer to handle the legal aspects of the purchase, and there will be fees associated with this service. Legal fees can vary depending on the complexity of the transaction and the lawyer’s hourly rate.
• Appraisal Fees: Lenders may require an appraisal to determine the value of the property, and the buyer is usually responsible for paying for this service.
• Property Survey Fees: In some cases, the lender may require a survey to determine the exact boundaries of the property. The cost of a property survey can vary depending on the size and complexity of the property.
• Mortgage Application and Processing Fees: Lenders may charge fees for processing and underwriting a mortgage application. These fees can vary depending on the lender and the type of mortgage.
• Mortgage Insurance: If the buyer is putting down less than 20% of the purchase price, they may be required to pay for mortgage insurance. The cost of mortgage insurance can vary depending on the size of the down payment and the lender’s requirements.
• Moving Expenses: Finally, buyers will need to pay for the cost of moving their belongings to the new property. This can include the cost of hiring a moving company, renting a moving truck, or other expenses associated with the move.

It’s important for buyers to work with their real estate agent and lawyer to understand all of the potential closing costs and adjustments associated with their transaction. A real estate agent can provide buyers with a breakdown of the closing costs, while a lawyer can provide legal advice and ensure that the transaction is carried out smoothly.

Adjustments After the Closing Date

When it comes to adjustments, buyers should be aware of any potential expenses that may arise after the closing date:

• For example, if the seller has prepaid property taxes for the year, the buyer should expect to pay their portion of the property taxes for the time period between the closing date and the end of the year. 
• Similarly, if the seller has prepaid utility bills, the buyer should expect to pay their portion of the utility bills for the time period between the closing date and the end of the billing cycle.
• Buyers should also be aware of any potential income that they may receive after the closing date. For example, if the property is being sold with tenants, the buyer may be entitled to receive rental income from the tenants. In this case, the seller will provide a statement of adjustments that takes into account any rental income that the buyer is entitled to receive.

In addition to understanding the potential closing costs and adjustments, buyers should also be prepared for the overall cost of homeownership. This may include ongoing expenses such as property taxes, condo fees (if applicable), utility bills, and maintenance costs. Buyers should budget accordingly to ensure that they can afford the ongoing costs of owning a property.

Conclusion

In conclusion, understanding the closing costs and adjustments associated with a real estate transaction is an important part of the home buying process. Buyers should work closely with their real estate agent and lawyer to understand all of the potential costs associated with their transaction and ensure that they are prepared for the overall cost of homeownership. By being prepared and informed, buyers can make a well-informed decision and enjoy the benefits of owning a home in Toronto.