Closing Costs are the out of pocket expenses associated with buying a home. It is important that you budget for these expenses as they cannot be rolled into your mortgage. Below are examples of the typical closing costs you can expect in Nova Scotia. Understanding Closing Costs can help you plan for your new home purchase.
Deed Transfer Tax—This is a straight forward tax, set my the municipality. In Nova Scotia, Deed Transfer Tax falls between 1% —1.5% of the purchase price. In HRM, it is 1.5%.
Lawyer—A lawyers role in the closing is to review all the documentation, explain it to the buyer, and handle all the transfer and disbursement of funds. This will typically run between $800 and $1,200.
Property Tax Adjustment—This expense is largely dependent on the value of the home and where it’s located. Many people roll their property tax into their mortgage payment, but in actual fact the municipality only collects it twice a year (end of April and October in HRM). The instalment covers tax payers for the following six months. Therefore, when a closing falls between collection dates, the seller has already paid up until the next instalment date. To correct for this, a pro-rated amount of what property tax balance is owed by the buyer to reimburse the seller, will be calculated at the time of closing.
Other Adjustments—If the property you are buying has oil/propane tanks or leased equipment, these could add up to additional closing costs. If the property has oil or propane tanks, the seller typically fills these before closing. Receipts will be provided to the buyer’s lawyer. If the buyer is taking over a lease, such as a hot water tank, there will be adjustments for that as well.
Location Certificate and/or Title insurance—The lender typically requires they get at least one of these. The former is a drawing completed by a qualified land surveyor that certifies the building is within the property boundaries and not encroaching on someone else’s land. This location certificate costs about $850, but if the seller has a fairly recent one, that can be used by the buyer for free. Title insurance is less expensive, around $450, and is an insurance policy against encroachments, zoning infractions, or title disputes. Many buyers opt for this less expensive option.
Miscellaneous—These include registering the mortgage and title, sending couriers, printing costs, etc.
I usually tell my clients to budget for an additional 2.5%—3% of the purchase price. There are strategies to get these costs down, either through your lender or during negotiations.
Closing Cost Cheat Sheet