Top 5 Closing Costs When Buying Pre-construction

There are a few “hidden” costs when purchasing preconstruction. The price you see on the price list isn’t going to be the price you pay at the end. Closing costs vary from person to person and from project to project, but here is a list of top 5 closing costs that you should be aware of.

Land Transfer Tax

 
Land Transfer Taxes are mandatory for all buyers of any property in the province. The way it’s calculated is based on a sliding scale so the higher the purchase price, the more land transfer tax you will end up paying. Land Transfer Taxes are different across provinces and in this article, we will be talking about Land Transfer Tax in the province of Ontario only. Based on a $500,000 purchase price, the total Ontario Land Transfer Tax payable on closing would be $6,475. If that property is located in Toronto, expect to pay an additional $5,725 for a total of $12,200. If you are a first-time buyer, you get a $4,000 rebate. As a rule of thumb, if you are a first-time buyer, purchasing a property that is $368,000 or less, you pay zero land transfer taxes.

Here’s a Land Transfer Tax Calculator: https://www.ratehub.ca/land-transfer-tax

Development Levies

 
These are essential taxes charged by the Government in order to fund nearby schools, parks, roads, sewers, and more. The government just wants to ensure that when a 40 storey residential building is finished, that those residents won’t be taking anything away from the existing community. Everyone has to pay their fair share. The municipalities charge the developer and they in turn pass those levies to the purchasers. Always ensure that these levies are “capped” in your purchase agreement so you will know roughly how much you will pay on closing. Having the levies uncapped can be dangerous since you won’t know those costs until a few years later and the amount much more than you’re prepared for. Most of the good builders will automatically cap the levies on the purchase agreement – otherwise you will have to speak to your lawyer or realtor to cap it for you within the 10-day cooling period. Levies range from $4,000 – $6,000 for 1 bedrooms and around $9,000 to $10,000 for 2 bedrooms on average.

Lawyer Fees

 
You’ll need a real estate lawyer to close the transaction and ensure all legal and financial conditions are met. They’ll also add your name to the title of the property and provide you with the keys. Prices of course vary, but you can expect to pay approximately $1,500 to $2,000 as a ballpark.

Utility Hook Up Fees

 
Utility companies need to come in and connect the utilities for the first time and this is a one time cost. Prices are usually within a couple hundred dollars.

Tarion Warranty

 
Tarion was created by the Government of Ontario to protect consumers of new homes by ensuring that builders abide the provincial legislation. Every preconstruction project must be enrolled and that enrollment fee is paid by the buyers. Tarion provides  protection for deposits, compensation for delays in closing, warranty defects in work & materials, and warranty for major structural defects. Prices range from $1,000 to $2,000 on average depending on the purchase price of the property.

 

Join The Discussion

Compare listings

Compare