Buying A Home? Don’t Forget To Ask Your Lawyer About The Closing Costs

It’s exciting to be buying a new home, but have you factored in the closing costs? Buying property involves more than simply its purchase price, you need to take into account the supplementary expenses involved in finalizing a real estate transaction. These expenses, referred to as closing costs, include various fees, taxes, and other charges that are necessary for concluding the sale. Among these costs are legal fees incurred for legal representation throughout the process. Familiarizing yourself with the breakdown of what these costs cover and how much they are will allow you to accurately budget and avoid unplanned expenses.

What Are Closing Costs In Ontario?

In Ontario’s real estate market, closing costs refer to extra expenses beyond the price of the home that buyers need to pay when they’re about to seal the deal. These costs cover the expenses associated with the legal transfer of ownership, title registration, and various other administrative fees. They also include title insurance, land transfer tax, home inspection fees, property appraisal fees, and provincial sales tax on mortgage default insurance if that applies to you. 

What Is The Role of the Real Estate Lawyer In Closing?

In Ontario, a real estate lawyer is a legal requirement during the closing process and for handling closing costs. They will:

1. Make sure all legal aspects of the property deal are in order, ensuring the purchase agreement meets legal standards.
2. Manage the transfer of funds, ensuring the buyer’s payment for closing costs goes where it needs to when it needs to.
3. Conducting searches to confirm there are no outstanding issues or liens on the property that could cause problems later.
4. Oversee the transfer of property ownership, making sure the buyer legally becomes the new owner while having the right paperwork to support that transfer.
5. Ensure all closing costs and legal fees are paid correctly.
6. Navigating the complex legal processes, making the property purchase smoother for buyers and sellers alike.

What Closing Costs You Should Expect When You’re Buying A Home

The total amount of closing costs can fluctuate based on different factors, such as the home’s purchase price and its type. Although the exact expenses may vary, there are several typical closing costs that home buyers in Ontario should anticipate such as:

Legal Fees and Disbursements

Legal fees and disbursements are a significant part of closing costs for home buyers in Ontario, encompassing the legal procedures involved in transferring property ownership. It’s mandatory for a property buyer to enlist a real estate lawyer to manage these legal aspects. These fees include the lawyer’s service charges, expenses for title searches, registration fees, and other costs associated with ownership transfer. By hiring a real estate lawyer, buyers ensure their interests are safeguarded throughout the purchase and that all legal obligations are fulfilled. 

Land Transfer Tax

Land transfer tax is a significant consideration for home buyers in Ontario when budgeting for closing costs. It’s a provincial tax based on the property’s purchase price. Rates vary between provinces, with Toronto imposing an additional municipal land transfer tax. If you’re a first-time buyer in Ontario, you qualify for a rebate. The tax amount can be calculated using online tools or a calculator if you’re so inclined.

Home Inspection Fees

Home inspection fees are a typical closing cost for home buyers but a home inspection is not mandatory. A home inspection helps identify any issues or potential problems with the property and the structures on it. It includes the professional inspection of the property’s condition, including its structure, systems, and safety, and will help you make informed decisions about repairs so that you can negotiate the purchase price. Costs vary based on property size and type but you should be able to get a quote beforehand. We would even recommend getting a few quotes before deciding which inspection company is right for you.

Property Appraisal Fee

When purchasing a property, home buyers may also encounter a property appraisal fee, particularly if they’re seeking mortgage financing. This fee covers the cost of a professional appraiser assessing the property’s market value, taking into account factors such as size, complexity, and location. A comprehensive property appraisal is crucial for determining the market value and ensuring the purchase price aligns with it. Mortgage lenders often require appraisals to verify the property’s value and protect their investment before agreeing to lend you the money needed to purchase it. 

Title Insurance

Title insurance, though not mandatory, safeguards against potential title-related issues. This insurance policy covers disputes, ownership claims, and other title-related concerns. Typically a one-time payment at closing, the premium secures coverage for as long as the buyer owns the property. Title insurance offers peace of mind, ensuring clear ownership and protection against financial losses due to title disputes.

Provincial Sales Tax on Mortgage Default Insurance

Home buyers in Ontario who opt for mortgage default insurance may face provincial sales tax on the premium. Typically required for down payments under 20%, mortgage default insurance premiums are often added to the mortgage, with the provincial sales tax calculated accordingly. The tax rate varies, necessitating consideration when budgeting to buy a new home.

What Do Average Legal Fees Look Like When You’re Buying A House in Ontario? 

When you’re buying a house in Ontario, it’s required that you enlist the services of a real estate lawyer. The cost of legal representation varies depending on several factors. Typically, home buyers can expect to pay from $1,800 to $2,400 for lawyer fees in a standard residential property purchase. However, this amount may increase if additional legal assistance is required. To ascertain the exact price of legal fees, you should directly consult your real estate lawyer. By doing so, you will receive detailed information on pricing options and any associated fees specific to the property you are planning to buy.

Questions To Ask When You’re Looking For A Real Estate Lawyer

When interviewing potential real estate lawyers, consider asking:

1. Do you specialize in real estate law, and how long have you been involved in the practice?
2. What are your estimated fees for assisting us with buying a house in Ontario?
3. Do you have experience with specific property types like detached homes or condos?
4. How well do you know the area where the property is located?
5. Can you provide references?

These questions can help you find a lawyer who offers reasonable fees without compromising quality. Additionally, review their website or social media for client feedback to ensure you’ve done your research.

Who Is Responsible For The Closing Costs?

In real estate transactions, the buyer usually shoulders the bulk of closing costs, although the specific breakdown varies based on the negotiated agreement. Buyers typically cover expenses like legal fees, land transfer tax, title insurance, appraisal fees, and home inspection fees, among others, while sellers generally handle real estate agent commissions, registration fees, and mortgage discharge fees. It’s essential for both parties to consult their respective real estate lawyers to clarify and ensure all closing costs are accounted for in the agreement before moving ahead with it. Real estate lawyers play a vital role in overseeing the closing process, ensuring accurate distribution of costs, and facilitating legal ownership transfer.

As closing day approaches, being prepared and having the additional costs readily available and included in your budget will make things go much more smoothly. Paying for closing costs is usually done through certified funds, which may include bank drafts or wire transfers. So, be sure to ask your bank to make arrangements for the funds you need in well in advance. Don’t leave it to the last minute or you could get yourself into hot water.

Work With An Experienced, Local Real Estate Lawyer 

Understanding and anticipating closing costs is crucial when buying a home in Ontario. Being informed of the different expenses involved is a smart move for your financial planning and helps to avoid unexpected problems. And, remember that working with a real estate lawyer is mandatory to complete the transaction. Doing so ensures all parties fulfill their obligations.

When selecting a real estate lawyer, prioritize expertise in this field and familiarity with local regulations and bylaws. At Hukam Law, we are experts in real estate law in Simcoe County, Brampton, and the surrounding areas. If you’re getting ready to buy a home in Ontario, give us a call 📞 at 705-915-0884, or send us an email at info@hukamlaw.ca. We’ll advise you every step of the way and take care of all the closing paperwork. Owning that dream property is possible. Let’s get started today.

***The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.