When you buy a home in Manitoba, there are several costs that you’ll need to pay in addition to the purchase price of the property. These costs are called closing costs, and they can add up to several thousand dollars. Below, we’ll aim to explain what closing costs are, what you can expect to pay, and how you can budget for them.
What are Closing Costs?
Closing costs are fees and expenses that are associated with buying a home. They are paid on the closing date, which is the day that you take possession of the property. Closing costs can include a variety of fees, such as legal fees, property transfer tax, appraisal fees, home inspection fees, title insurance, and mortgage insurance.
A general rule of thumb is to budget for roughly 2% of your house purchase price.
Legal Fees
One of the closing costs that you’ll need to pay is legal fees. You’ll need to hire a real estate lawyer to handle the legal aspects of your home purchase. This can include conducting a title search, reviewing the purchase agreement, and registering the property with the government. Legal fees can range from $500 to $2,500 or more, depending on the complexity of your transaction.
Property Transfer Tax
In Manitoba, you’ll need to pay a property or land transfer tax when you buy a home. The tax is based on the purchase price of the property and ranges from 0.5% to 2% of the purchase price. For example, if you buy a home for $300,000, you’ll need to pay between $1,500 and $6,000 in property transfer tax.
Land transfer tax rates in Manitoba:
- Up to $30,000 0%
- $30,001 to $90,000 0.5%
- $90,001 to $150,000 1.0%
- $150,000 to $200,000 1.5%
- Amounts over $200,000 2.0%
Appraisal Fees
Your lender may require an appraisal of the property to ensure that it’s worth the amount you’re borrowing. Appraisal fees can range from $250 to $500 or more on a conventional mortgage. This will be dependent on the size and complexity of the property.
Jennifer Knapp, Branch Manager at Westoba, says, “Appraisals are an important part of the home buying process, ensuring that the property’s value aligns with your investment. By budgeting for appraisal fees and obtaining a professional assessment, you can gain peace of mind knowing the property’s worth matches your financial commitment.”
Home Inspection Fees
While a home inspection is not required, it’s a good idea to have one done to identify any potential issues with the property. No one wants to find out upon move in that the house needs a new furnace or a new roof! Home inspection fees can range from $250 to $500 or more, depending on the size and age of the property.
Title Insurance
Title insurance protects you against any defects in the title to the property, such as liens or encumbrances. Title insurance can cost between $200 and $500 or more, depending on the value of the property.
Mortgage Insurance
If you’re putting less than 20% down on your home purchase, you’ll need to pay for mortgage insurance. The cost of mortgage insurance depends on the size of your down payment and the purchase price of the property; it is usually financed along with the mortgage. This is certainly something to watch out for the Provincial Sales Tax on a CMHC premium is included in the closing costs and must be paid upfront. Your lawyer will be able to assist with this!
Jennifer adds, “Mortgage insurance is a vital consideration when purchasing a home with a down payment of less than 20%. By understanding the cost implications based on your down payment and the property’s purchase price, you can effectively plan for this expense.”
Other Costs
In addition to the closing costs mentioned above, there may be other costs associated with your home purchase, such as moving expenses and utility deposits. It’s important to budget for these expenses in addition to your down payment and mortgage payments. A move locally can range from $550-$2,000. Moving further from out of province or country will significantly increase your budget.
How to Budget for Closing Costs
Closing costs can add up to several thousand dollars, so it’s important to budget for them in advance. One way to do this is to estimate your closing costs using an online calculator or by speaking with your real estate agent or with us at Westoba. Once you have an estimate of your closing costs, you can add this amount to your down payment and mortgage payments to determine your total monthly housing costs.
Another way to budget for closing costs is to set aside a certain amount of money each month in a dedicated savings account. This can help ensure that you have enough money to cover your closing costs when the time comes.
Closing costs are an important consideration when buying a home in Manitoba. They can add up to several thousand dollars, so it’s important to budget for them in advance. By understanding what closing costs are and what you can expect to pay, you can make informed decisions about your home purchase and ensure that you have enough money to cover all the necessary expenses. Your advisory team here at Westoba can assist in figuring out your finances for your home purchase. Book an appointment today with one of our experts.
