Bryan is often asked, after the searches are done and the requisition letter goes out, what the completion costs are going to be, and how much money a buyer needs to send in order to complete the transaction. This article will explain how to calculate this, and what to do if you bank with a non-standard lender, such as Tangerine or Simplii.
In order to estimate the amount you will need to pay the lawyer to complete the transaction we start with the purchase price. This value is the starting point for the calculation, naturally enough. You have already paid the deposit, so you do not need to provide that amount again, and can deduct that from the amount which will be needed on completion.
One of the things we cannot estimate are all the adjustments which will be provided by the Seller’s solicitor. These are for things like property taxes, condo fees and if the property has a tenant, rent. Essentially, the Seller’s lawyer will consider how much of these amounts have been paid by the Seller, how much the Seller should have paid based on the completion date, and then either credit the Buyer or the Seller based on whether the Seller has under or over paid. For example, if the property had $9000 of property taxes for a year, and the Seller had paid the full $9000 before completion, but was selling the property on the 240th day of the year, then the Seller would be credited for the $3000 of taxes paid for that part of the year which the Buyer will own the property. Effectively, the Seller has paid part of your property taxes, and wants to be paid back and that is fair enough. Typically these adjustments are less than $1000, which is well within the interac transfer limit, so for the purpose of estimating, we can safely ignore them.
Next, we can consider the Land Transfer Taxes and Municipal Land Transfer Taxes if your purchased property is in Toronto. You can use an online calculator to do this, inputting the purchase price, municipality and whether you are a first time homebuyer. Then add these to the completion amount.
Next, we have the transfer fees. The Land Registry charges a fee of $84.23 ever time you change something, and most transactions involve changing two things: the title to your ownership, and then adding a mortgage, for a total of $168.46. Some lenders, especially if the property has a tenant, will require an Assignment of Rents as well. Add these amounts to your completion costs.
Next, we have Title Insurance. For a guide on how to estimate your Title Insurance cost, please read our article on Title Insurance, and add that estimated cost to your completion costs.
Next, if you are in Toronto, there is an MLTT administrative fee fee of $109.25, so add that to your completion costs if applicable.
Finally, we have the lawyer’s fees. Typically, including searches, fees and HST, lawyer fees come to around $3000. The biggest factors in determining the lawyer fees are whether you have a mortgage, and how complex that mortgage was to process (the simplest mortgages cost $250, the most complex $900) and whether you incurred additional fees for things such as contract reviews and condo status certificate reviews, but $3000 is a good average. Add this amount to your completion costs.
We now have the full amount necessary to complete the transaction. If you are getting a mortgage, you will now need to subtract the amount of the mortgage from this total in order to get the amount you will personally need to pay to the lawyer for completion. Remember when doing this that if you had a down payment of less than 20%, and thus are required to pay mortgage default insurance, the bank will pay that fee out of mortgage funds and send less to the lawyer. For example, if your mortgage was $520,000 but the mortgage default insurance was $20,000 (which is not unreasonable based on that size of mortgage) then the bank would only send the lawyer $500,000, though you would still be obligated to pay back $520,000. Take this into account when subtracting from the total completion costs.
This will give you the total completion costs. Purchase price - deposit + LTT/MLTT + Reg Fees + Title Ins.+ Lawyer fees - mortgage funding.
If you bank with Simplii, Tangerine or a credit union, they may not be able to process wire transfers to the lawyer’s account fast enough, depending on when your lender gets mortgage instructions to the lawyer so we know the exact completion amount. If this is the case, you may wish to simply go to TD, where Bryan has his trust account, and open a simple chequing account and transfer all your available funds or an estimate using the above calculation for the completion into that account. It is generally better to have more funds available than less, since the penalty for having too much is needing to transfer money back to your usual bank, and the penalty for too little is potentially delaying the completion. Then, when Bryan knows exactly what amount is needed, you can visit a branch and transfer the funds instantly, since a TD to TD transfer takes no time.Banking with Non-Standard Lenders
If you are selling your property, you have your own set of completion costs to consider. The first thing we will do is essentially exactly what was done for buying, but on the other side. As the Seller’s solicitor, Bryan will create a statement of adjustments, which will take the amount of property tax paid in the year of sale, and then determine how much you should have paid based on the number of days of that year you’ve lived there, and add or subtract from the completion amount based on whether you’ve paid more or less than you should have. Most Vendors have paid more property taxes than necessary, and so get extra money from the Purchaser. The same goes for common expenses for condos.
Buyer
Seller
