The Costs of Buying a Home
When buying a home, the purchase price is just one of the many costs you need to consider. It is important to budget and be prepared for these costs as some can be expensive. There are three types of costs: Pre-Closing, Closing, and After Closing Costs.
A home inspection is always recommended before purchasing a home. They are qualified professionals who will look for underlying problems in a home that may not be obvious to the untrained eye. With a purchase this size, you want to know exactly what you are buying. To find a Home Inspector, you can speak to your real estate agent or ask friends and family members for referrals.
Septic, well, water
Depending on the property you are buying there are other inspections that may be necessary including septic, well, and water inspections. This is more applicable if you are looking at a more rural property as most properties within an urban setting are on municipal water and sewer services.
Appraisal and/or Survey
An appraisal or survey of the property may be required by your mortgage lender before they approve your financing. This appraisal is done to ensure that the actual value of the home or property matches the price at which you will be buying it.
Land Transfer Tax
When purchasing a home in Ontario, you must pay a land transfer tax of between 0.5% to 2% of the purchase price. If you are a First Time Home Buyer, you will be eligible for a refund on this tax and your real estate professional can guide you through that process. To estimate the land transfer tax on a property, click here.
You will be required to buy mortgage insurance if your down payment is less than 20% of the purchase price. The rate increases for this as the down payment decreases. You can visit www.cmhc-schl.gc.ca or speak with your mortgage advisor for more information.
If you are buying a home, you will need to hire a lawyer. While the price can vary depending on who you hire, their main task will be to do review all legal documents, perform a Title search on the property to ensure there are no liens, and they will register your deed and mortgage. To find a lawyer, you can ask your real estate agent or friends and family for a referral, or go to www.LSUC.on.ca (Law Society of Upper Canada) to find a lawyer in Ontario.
To protect against fraud, potential encroachment issues with neighbours, public survey errors, and many other items, you will need title insurance. You lawyer will work with you on this one.
You will need to reimburse the seller for any cost that were pre-paid for you, as the buyer. This can include property taxes, condo fees, and rental fees. The amount owed will be prorated for the days that you actually own the property that were prepaid.
In order for your lender to release your closing funds, you will need to provide proof of insurance on the home.
Harmonized Sales Tax (HST)
Newly built homes or “New Builds” are subject to HST of 13% but HST does not apply to re-sale homes. Ask your realtor for more information as “new build” buyers may be elegible for rebates from both the federal and provincial governments.
Tarion New Home Warranty Program
Tarion warranties guarantee new builds in Ontario. They are designed to protect buyers from issues that may arise in their new build homes including deposit protection. The enrollment fee is sometimes included in the purchase price and other times due at closing. Please visit www.tarion.com for more information.
This cost can vary dramatically depending on a variety of factors: where you are moving to, how much stuff you have, and will you be hiring movers or doing it yourself? Take some time now to estimate these costs and build them into your budget.
Utility and Service Hook-Ups
Some utility companies will charge a set up or moving fee. Although they may seem nominal, when combined this can add up pretty quickly. Call the different services you will be needing to find out exactly what it will cost.
Renovations and Repairs
If your new home will need any renovations or repairs, this can add to the costs significantly. Your home inspection and disclosure from the seller will give you a good idea of any necessary repairs.
Appliances, Furniture, and Decor
If you plan on updating the decor of the home, you will want to budget for it. Common items to consider include: needing new furniture to fill a space, adding or replacing existing window coverings, and appliances.