Purchase of a Home - Closing Costs

By the term "Closing Costs" we mean the amount of money a purchaser must bring into his or her lawyer's office prior to possession.  Aside from the balance of downpayment, closing costs are made up of several distinct components:

Also see an example of a typical transaction

Disbursements

Disbursements are expenses incurred by a lawyer on behalf of a client. 

Typical disbursements are as follows:

Land Transfer Tax

At the time title is registered in the land titles office, land transfer tax must be paid to the Province of Manitoba.  The amount of tax is determined by the purchase price of the property, and is charged as a percentage of the purchase price, on a progressive scale.  The percentages are as follows:

1st 30,000.00                             NIL
$30,000.00-90,000.00               0.5%
$90,000.00-$150,000.00           1.0%
$150,000.00-$200,000.00          1.5%
over $200,000.00                        2.0%

Land Titles has an online land transfer tax calculator you can use to calculate the land transfer tax portion of the land titles fees.

Registration Costs

The land titles office charges a fee of $124.00 to register title into the purchaser's name.  The cost of registering a mortgage, if any, is an additional $124.00

Survey Certificate

Often referred to as a building location certificate, this document shows the location of buildings and other structures on the subject property, including distances between such improvements and the property lot lines.  A survey will usually show whether or not any structures belonging  to the property are encroaching over the lot lines onto neighbouring properties, and whether structures belonging to neighbouring properties encroach across your property lot lines.  An existing survey may or may not be available, and if available it may not reflect the current physical status of the property.  If an accurate certificate is not available, a surveyor  typically charges $450.00 plus GST to survey a Winnipeg property. 

A Survey and Zoning Memorandum will be required if either you or your lender (if applicable) requires it.  Title Insurance (see below) is a cost effective alternative to obtaining a new survey.

Zoning Memorandum

This certificate is prepared by the City or Municipality, and indicates whether the structures shown on the survey meet their requirements as to "yards and alignment".  Yards and alignment refers to how close structures are located to the property lines.  The cost is $55.50 for Winnipeg property.

Title Insurance

As an alternative, or in additional to obtaining a Survey and Zoning Memorandum, a policy of Title Insurance can be obtained.  The cost depends on the value of the property and the terms of coverage and is typically $3000.00 (covers purchaser only) to $700.00, depending on the purchase price (for both purchaser and lender).  The policy of title insurance is a one time only fee paid to protect you and your lender against any defects in title or encroachments.  Advantages of title insurance are that it can be obtained quickly, when there is no time to get both a survey and zoning memorandum, and that it costs less than obtaining a survey and zoning memorandum.  Disadvantages are that no actual survey drawing is prepared.   A surveyor's drawing confirms the location of all permanent structures on your property (fences typically excluded).

Tax Certificate

To ensure there are no unpaid property taxes, it is necessary to obtain this certificate.  The City of Winnipeg charges $44.00 for such a document.

Couriers

For fast and secure movement of  important documents, keys and money, couriers are used.  Typically 5-7 courier fees are incurred, at a total cost of approximately $63.00.

Title Searches

The land titles office charges a fee for title searches and copies of documents registered against the title.  The total cost is generally $60.00 for up to two title searches.

Miscellaneous Expenses

A number of miscellaneous costs are incurred on behalf of a client for postage, photocopying, fax charges, long distance calls, etc.  The standard charge for these is $30.00.

GST and PST

GST and PST is charged on legal fees and some disbursements, but not on land transfer tax or other land title costs.

Tax Adjustment

Property taxes are paid annually and always cover the period from January 1st to December 31st, regardless of the date on which they become due..  Taxes are due on June 30th in the City of Winnipeg and in rural areas the due date is usually in the fall.

Either the buyer or the seller pays the annual tax bill, and the paying party is reimbursed by way of an adjustment to the purchase price.  In the end you will pay taxes for only the portion of the year that you had possession of the property.

If a property is enrolled under the City of Winnipeg Tax Instalment Payment Program (TIPP), payments are made monthly directly to the City.  Instalments are made beginning in January and are effectively a "pay as you go" plan.  Monthly instalments made to your lender are different.  Not only are they paid to the lender, but the account must accumulate a sufficient balance to pay the tax bill in full by June 30th.  This means you have made a full years worth of payments by June 30th, whereas you only needed to make 6 months worth of payments by June 30th under the City's TIPP program.  If you lender permits you to make payments under TIPP, it is desirable for that reason.  You may only start TIPP for January first, or continue the program if the sellor has already enrolled the property under the TIPP program.

Interest

If you are obtaining a mortgage, those funds will not be available until 2-4 weeks after possession because of processing time in the land titles office.  The standard offer to purchase provides that a purchaser will pay interest to the seller during this period, at the same rate of interest as the mortgage.  As you will not be paying interest to your lender until funds are released, the delay results in no additional cost, simply a requirement that your lawyer receive one month's interest to cover this delay.  Any excess is refunded once the transaction is completed.

Typical Transaction:

The following is an example of a typical purchase transaction.  It is advisable to consult a lawyer with the specifics of your particular transaction.
Price $450,000.00
Mortgage $337,500.00
Taxes $4,000.00
Possession date July 1



Legal Fees
$1000.00
PST and GST on legal fees
$120.00



Disbursements

Land Transfer Tax on $450,000.00 $6650.00
Registration Costs ($107.00 x 2) $214.00
Title Insurance (if needed) $248.00
Tax Certificate $44.00
Couriers $45.00
Title Searches $52.00
Miscellaneous $30.00
GST and PST $21.97
Total Disbursements
$7,302.97



Property Tax Adjustment

credit sellor for 6 months as seller has paid taxes for calendar year
$2,000.00



Mortgage Interest

assume 1 month @ 2.90 percent on $337,500.00
$804.00



TOTAL CLOSING COSTS (not including your balance of downpayment)
$11,226.97

Note: If possession was prior to June 30th, the taxes would not yet have been paid, and the purchase price would instead be adjusted downward to reimburse the purchaser for  the seller's portion of the year.

Your downpayment along with the closing costs must be received by us a minimum of two working days prior to the date of possession by way of a Bank Draft or Certified Cheque made payable to "Timothy A. Martin in Trust".

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