May 20th 2016
When we think of buying a home most of us look at the purchase price, mortgage amount and down payment however, there are a number of other costs to consider:
Appraisal – the property is evaluated to ensure it is worth the purchase price. The appraisal is arranged by your lender and the fee can be anywhere between $300.00 and $500.00.
Home inspection – a satisfactory home inspection may be a condition of the purchase. Even if not required, a home inspection can be very useful in planning repairs and improvements. The cost is about $500.00.
Mortgage default insurance and applicable tax – if your down payment makes up less than 20% of the purchase price you will be required to purchase mortgage default insurance. The premium may be added to your mortgage advance however, the provincial sales tax is paid by the borrower upon closing. The tax can range from a few hundred to a few thousand dollars depending on the amount of the insurance premium.
Home insurance – this is a requirement for obtaining your mortgage. The cost is between $1,000.00 and $2,000.00 per year and is often paid up front.
Moving costs – it is surprising how quickly boxes and tape as well as moving trucks and gas, can add up. You can pay $500.00 to a few thousand dollars depending on the amount, distance and nature of the items you need to move.
Legal fees – your lawyer will charge a fee for their services, usually $1,500 or more depending on the work involved.
Land transfer tax (provincial and municipal) – in Ontario LTT rates range from .5%-2.0% based on the purchase price. First time buyers are eligible for a rebate of up to $2,000.00. Municipalities such as Toronto charge their own LTT in addition to the Provincial one.
Title insurance – this is commonly used in lieu of obtaining a survey. It protects you and your lender from title defects and fraud and is well worth the money. The cost varies from $150.00 to $325.00 depending on the type of property.
Adjustments – if the seller has prepaid property taxes or utilities, you must reimburse them upon closing.
Once you are in your new home, you may have immediate repairs to do or wish to paint and decorate, so make sure to have enough on hand to settle in and make it yours!
As a rule consider saving between 3% and 5% of the purchase price to cover all of your closing costs and moving expenses.
If after reading this you feel purchasing a home may still be a bit out of reach, take a minute to re-evaluate your budget and saving plan to account for any additional costs you may not have considered.
Written by Karyn Smith