Closing costs are the fees which are associated with finishing any real estate transaction. In Ontario, these are usually paid for by the buyer, and usually cannot be added to the mortgage. Buyers must have money set aside on top of their down-payment to ensure they can take smooth possession of their property.
In this blog post, we will cover the different types of closing costs and how they apply to both resale and pre-construction condos.
Resale condos (those we find on MLS or on MySquareOneCondo) typically have what is commonly referred to as “standard closing costs”. These usually include items like lawyer fees, disbursements, mortgage charge and land transfer tax.
The buyer’s lawyer takes into account any credits the previous owner paid (such as utilities or property tax) and prepares a statement of adjustments. This document breaks down all of the fees and their amounts.
All of these fees are paid for by the buyer, to their lawyer usually 3-5 days before closing. Although there are no set rules on how much the closing costs should be, they typically range around the 2% of the total sale price of any condo purchased in Mississauga. Keep in mind that unlike Toronto, Mississauga does not have a double land transfer tax, making the closing costs lower in Mississauga than Toronto.
For pre-construction condos, the closing costs are typically a mystery for most buyers. This is in part because of the long legal agreements of purchase and sale builders use when selling units before they are built.
Since the buyer is buying a brand new condo, he or she is not only responsible for the typical closing costs associated with resale condos, but also for a bunch of other charges. These typically include; development charges, levies and utility hike up charges. It’s important to note that at the time of purchase, it’s NOT possible to determine the exact amount of closing costs for any pre-construction condo, as many of the charges are yet to be determined.
Purchasers are often surprised to find out that the fees can result in an additional $10k for one bedrooms or 12k for two bedrooms. The good news is that working with a VIP realtor like myself, I can get many of our clients “caps” on these closing costs; resulting in a limit of how much a builder can really charge on closing a unit.
Despite the fact that Pre-construction condos have higher closing costs than resale condos, many continue to buy pre-construction condos. This is in part due to the fact that pre-construction prices are still relatively low in Mississauga. Therefore, if you buy a pre-construction condo today with a VIP agent, chances are that it will be worth more than other similar units by the time it is ready.
Finally, it’s important to take into account other closing costs such as moving expenses. Another top priority should be changing your driver’s license and getting property home insurance.
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