If you’ve ever researched buying a condo, you’ve probably stumbled across the term “closing costs”. The term umbrellas many different small costs that aren’t expensive on their own, but as they add up, they can seem a little bit daunting and are definitely something you should put some money aside for.
Something else that often comes as a shock to condo buyers is that closing costs are paired outright. They are not included in the mortgage you qualified for.
To get you set up for a successful purchase, and to ensure that no unwelcome surprises welcome you at the finish line of your purchase, we’ve outlined some common closing costs below. Let’s get started.
Down Payment
The down payment on a condo purchase will be the largest out-of-pocket expense that you will have to pay in the buying process. Typically, mortgage lenders expect at least a 5% down payment on any real estate purchase, however, some people will pay as much as 20% down which will avoid CMHC insurance costs.
Land Transfer Tax
When you buy a new piece of property in Nova Scotia, you must pay a Land Transfer Tax called the Deed Transfer Tax. The tax rates vary in each municipality, and the amount is calculated based on the sale price of the property you are buying.
The Halifax municipality tax rate for land transfer is currently 1.5% of the sale price. So, if you were to purchase a $300,000 condo, the land transfer tax would equal $4,500.
If you are a first time home buyer and are worried about closing costs, check out some of the options our country has in place to ease the burden.
Lawyer Fees and Disbursements
Some people may not know this, but every home or condo purchase must be reviewed by a lawyer. The legal fees will vary depending on the lawyer that you choose to represent you in your purchase, however, to be on the safe side its good to set aside approximately $1000. This factors in the costs of the lawyer, and the disbursements, which are costs that your lawyer needed to pay to process the transaction, such as registering the deed.
Inspection
A condo inspection is optional, but always a good idea to do before closing day. An inspector will check the entire condo to ensure that everything works and that there are no major concerns. Buying a condo or home will likely be the largest purchase of your life, so you definitely want to make sure it is functioning correctly. Inspections vary in cost but typically range around $300-$400+HST.
Property Insurance
Though home insurance is not an amount that you must pay on closing day, it is something that must be something that you have acquired before closing day. Home insurance is typically paid monthly or annually. The average property insurance for condos in Halifax is $700 per year.
Property Taxes
You may need to reimburse the previous property owner if they have already paid property taxes for the full year. You may be given the option to set-up an automatic payment plan with your lender, however, this may end up costing you extra interest or fees if you go with that route. The previous owner may have also pre-paid condo fees, which you may need to reimburse them for as well.
Title Insurance
This is not a mandatory expense but one definitely worth mentioning. Acquiring Title Insurance will protect you against losses due to title defects. Title defects are problems that prevent free and clear ownership of a property. They include situations like:
Right of way.
Neighbouring encroachments.
Unpaid liens against a condo.
Fraud and forgery.
Zoning non-compliance.
These issues may not be obvious when purchasing a condo and are typically rare in condo purchases, however, they can be very expensive to fix if they do show up. Purchasing title insurance can prevent these unforeseen expenses.
Other Costs that come with moving day
Here are a few other costs that are quite minimal in comparison to the one discusses above, but can add up quickly:
-U-Haul to move furniture
-up to $1000 for professional movers
-$50 to change the locks
-up to $50 in cleaning supplies
-elevator rental
-new utility account hookup fees
In closing, there are many small factors that can end up costing buyers more than they expected. That’s why it is always good to be informed and plan ahead. Buying a condo is an exciting journey, so don’t let this list scare you in any way - with the right information, planning and team on your side, this process can be rewarding and easy.