What Costs to expect when Buying a Home

Additional Costs When Buying a Home

The purchase price of your home is only one of the costs you’ll encounter when purchasing a home. Over the years, I have compiled a list (below) of the most common items that people buyers needed clarification. Here are other possible costs you need to consider:

• Mortgage loan insurance: If you are putting less than 20 per cent of the house value down, you’re going to need mortgage loan insurance. Generally, this is covered by CMHC  Depending on the lender, the premium can be added to mortgage payments. Note that if you have more that 20% equity in the property, there are no additional insurance premium that the buyer is responsible for.

• Appraisal fee: Lenders typically loan a percentage of the home’s purchase price or the market appraisal of the property. Cost depends on the size and complexity of the assignment.  This fee is most commonly absorbed by the lender, but in some cases the buyer maybe responsible for the cost of the appraisal. This fee is generally between $300-$500 for a single family residential home and between $700-$1500 for a commercial style property (commercial zoning, or multiunit residential with 4 or more units.)

• Land survey: The lender may ask for a current survey or certificate of location before signing off on the loan. There can be a substantial cost for having a new survey done on the property. The cost of a new survey is approximately $1500 and up depending on the size, location and use of the property.   Land surveys are less common in older neighbourhoods and if present, are usually out of date i.e not accurately depicting the location of fences, structures etc. With the introduction of title insurance, buyers are more confident in purchasing homes without an existing survey.

• Deposit: A deposit normally goes with the formal offer to purchase. Offer are generally written in such a way that a deposit will be given upon acceptance of the offer.   The deposit amount is generally between 2-5% of the purchase (or offer) price.  These fund will most commonly be delivered as certified funds (i.e bank draft, Money Order, Certified Cheque) within 24 hours of the acceptance of the offer.  When pursuing a property  be sure that you have access to these funds!  NOTE:  Many buyers confuse the “deposit” with the “downpayment”  The deposit is simply the amount that you offer upon acceptance of your offer.  The downpayment is the total amount that you have to put down on the property.  The total downpayment includes the deposit amount. Example: you purchase a home for $500,000, place a deposit of 5% ($25,000) but you have have a total downpayment 20% ($100,000)   On closing, you will have to provide the remaining 15% ($75,000).

• Insurance: The lender will require proof of property insurance for the replacement value of the house and its contents from the day you take ownership. Remember as long as there is a mortgage on the property, you must maintain an active insurance policy.

• Title insurance: Provides coverage in case of problems with the property title among other things. The cost is relatively low, usually a few hundred dollars. Definitely worthwhile in today’s marketplace.  For the relatively nominal cost, this insurance will guarantee the title of the property. The costs are tiered, but for the average home in Toronto, expect a cost of approximately $300-500.

• Application fee: Some lenders will pass on the cost to process your application. These fees vary and some lenders will waive entirely if you have other accounts with them. If you are well qualified candidate, your lender should cover the cost of these fees, only in specific circumstances should the costs of these (and “Broker” fees” )be passed along to the buyer.

• Mortgage broker’s fee: If you use a mortgage broker, a fee may be charged to arrange a mortgage on your behalf.  Again, as in “application fees” these would only apply in extenuating circumstances and generally should not be passed along to the buyer.

• Home inspection fee: An inspection protects the buyer by revealing any problems in the property that you’d want to know before you move in.  Be sure to choose a qualified and certified inspector (Carson Dunlop for instance) The cost of a home inspection is approximately $350-$450 for your average sized home. The fees will vary for larger homes or multi-unit dwellings.  Remember a home inspector can only give you a “Scope” of the home and cannot in most cases establish latent defects in the home.  NOTE:  If you are buying a home for the purposes of performing extensive renovations or improvements, It is a great idea to have a trusted contractor walk through the property with you instead of or in addition to a home inspection.  Generally, a contractor will do so free of charge or for a nominal fee.

• Legal fees: are the fees that your lawyer charges to arrange for the closing and transfer of deed. These fees and disbursements range from $1300-1500 for a typical closing. Note when purchasing a multi-unit dwelling or other commercial properties, the fees  will vary dramatically, and would not include items like, fire safety inspections, or compliance verification.

• Land Transfer Tax: You can estimate the amount of land transfer tax you will be subject to pay by using the Land Transfer Tax calculator on this site. Calculate both your Ontario and City of Toronto (if applicable) land transfer taxes. First time home buyers qualify for a maximum $2,000 (LTT on a $227,500 home) provincial rebate and a maximum $3,725 (LTT on a $400,000 home) City of Toronto rebate.  See how this is calculated and if you qualify for rebates here

• Goods and Services Tax: Resale (used) homes are exempt from HST but it does apply to newly constructed homes and may qualify for a partial rebate depending on the sales price and if the home is going to be your primary place of residence. The HST is generally Included in the purchase price, but be sure to clarify this on your agreement of purchase and sale.

• For new homes costing $350,000 or less, you will receive a HST rebate of 36% of the HST paid to a maximum of $8,750. The rebate for new homes costing between $350,000 and $450,000 declines to zero on a proportional basis. HST also applies to most of the services provided in completing the real estate transaction.

• Other costs: These include moving costs, fees charged by utilities for service hook-ups, property tax and other adjustments (an adjustment takes place when the seller has already paid for something in advance and wants to be credited for the unused portion on the date the house becomes yours, most commonly Water and Waste Usage, and property taxes), and ongoing maintenance (condo fees etc) and utility costs.