Costs to Consider When Buying a Home
Deposit: When making an offer it is necessary to make a small deposit to show your good faith. It will be deducted from the purchase price (forms part of your required 5% down payment) but will be cashed when the offer is accepted and held in a trust account at the real estate office with the rest to be paid when you “close” the purchase of your new home. The amount varies depending on the price of the house but is usually about $1000. I can advise you on what amount would be appropriate depending on what you are purchasing.
Home Inspection: Before you buy a property, it is a good idea to have it inspected by a qualified professional property inspector. The home inspection takes 2-3 hours to complete and you should be provided with a very detailed report. This charge will vary but is about $350 - $450
Rural/Recreational Properties: There are a number of issues that must be looked into by buyers of rural/recreational properties. They include water quality and quantity, the condition of the septic system, road access, and availability and cost of municipal services (e.g. garbage collection, schools, bussing, road maintenance). All such issues need to be investigated fully at the time of purchase. Some of these investigations will cost money. For example, you may be required to pay a fee for the water quality and quantity tests. Also, if you wish to have a professional assessment of the condition of the septic system, there will be a fee.
Lawyer Fees: $800 - $1200 (Call several lawyers and compare quotes)
Disbursements: When your lawyer closes the purchase he/she will have to pay a variety of fees for you such as registering the deed and mortgage, building and tax certificates. This will vary by the home but will likely be $600-800.
Property Tax Adjustment: You may be required to have cash on hand to repay the vendors for taxes they have paid in advance depending on possession date and how the vendors pay their taxes. A good rule of thumb is to have enough money on hand to pay six months of taxes.
Land Transfer Tax: As a first time home buyer in Ontario you are eligible to receive the Ontario First Time Home Buyers Land Transfer Tax Credit, a tax credit up to $2000. This means eligible buyers will not have to pay a land transfer tax on homes up to $227,000. In order to qualify the land must be owner occupied; and the purchaser(s) cannot have owned a house, or interest in a house, regardless of location. To instantly receive this rebate, upon purchasing your first home, advise your lawyer ahead of time that you qualify to receive the rebate. For more information on the governement credit, go to Land Transfer Tax Credit for First Time Home Buyers. If you do not qualify, the usual land transfer tax is calculated as follows: .5% for first $55,000 and then 1% from $55,000 to $250,000 of purchase price and 1.5% of any balance. i.e. $170,000 home would be $1425.
Down Payment: A minimum of 5% is required as a down payment to buy a house. It is worth saving as much as you can for your down payment as a larger down payment means you need a smaller mortgage. This will save you thousands of dollars in interest charges. In some cases a 10% down payment may be required such as if you are self-employed or have a poor credit history. If you have more than 20% down, no insurance premium is required at all. If your down payment is less than 20% of the price of the home, you will have to purchase mortgage default insurance through CMHC.
CMHC: If your down payment is less than 20% of the purchase price of the home, the mortgage will require insurance from CMHC. This fee is usually added to the mortgage but ranges from .5% of the mortgage value to 3.75% depending on the size of the down payment. Use the CMHC calculator at CMHC Fee Calculator to find out what it will cost you. This fee can be added on to your mortgage. Talk to your mortgage Specialist to find out more
Title Insurance/Survey: If the house you are interested in does not have an up-to-date survey you may ask the seller to provide you with one or you may decide to get one yourself for $700-$1000. Most people don't bother getting one theses days and instead choose to purchase title insurance. This price varies but is a one-time payment of around $300 paid to your lawyer. It may be worth getting title insurance even if you do have a survey as it saves time for the lawyer and may save you more in lawyer fees than what it costs to get the insurance.
Home Insurance: You will have to arrange insurance for the property before possession. You don't start paying for it until your house closes but you should have the details all worked out and ready to go in advance. The annual rate for a basic policy varies depending on what type of house you buy but runs approximately $500-$800. (Call several insurance companies and compare quotes).
Service Charges: You'll be charged a fee to hook up new services and utilities, such as your telephone and cable.
Condominium Purchase: There are some special costs involved with a condominium purchase. For example, you will want a Status Certificate, which includes all important documents concerning the financial affairs of the condominium corporation, as well as the by-laws and the rules that owners are required to abide by. The Status certificate costs $100 plus photocopying. Also, a condominium owner pays a monthly maintenance fee to the condominium corporation. This fee will be apportioned between the seller and the buyer as of the date of closing.
Continue reading my Home Buying information at First Time Home Buyer and Buying a House.
Preparing to Buy
Step 1: Is Homeownership Right for You?
Step 2: Are You Financially Ready?
Step 3: Which Home is Right for You?
Step 4: The Buying Process
Step 5: Now That You're a Homeowner
Words to Know When Buying a Home
User-Friendly Checklists and Worksheets
Afordable Housing Programs in Ontario
Your Realtor Can Help
Moving with Kids
Moving with Pets
TD Mortgage Rates
Calculator and Tools
Learn About Mortgage Pre-Approval