The cost of buying a home is always more than the purchase price and a moving truck rental. First-time home buyers are often shocked when they see the total amount they need to pay on closing day. Knowing what to expect ahead of time can help you financially prepare. By familiarizing yourself with more than just your down payment and regular mortgage payments, nothing will come as a surprise on closing day. Plus, with this in mind, you can negotiate with your broker or lender to waive some of these fees.
Home Inspection Fee: $350 to $600
When you put in an offer to purchase a home, you are also expected to provide a deposit. This assures the seller that you will indeed go through with the sale when closing day arrives – and if you don’t, the seller keeps the deposit. If you do go through with the sale, the deposit will be credited in full and put towards the purchase of the house. There is no set amount that you need to provide, but generally speaking, a higher deposit says you’re a serious buyer and can ultimately save you money on interest. Our handy mortgage calculator can even show you how different deposit values can greatly change your total interest paid. And remember – the deposit and the down payment are not the same thing!
Appraisal Fee: $300 to $500
Your lender will only lend you so much when it comes to your mortgage. The amount they lend you will either be a percentage of the appraised market value of your home, or a percentage of the home’s purchase price – often, the lesser of the two.
Legal Fees: $500 to $1,000
Real estate lawyers manage all of the legal paperwork involved when acquiring a mortgage. After your purchase, they draft your mortgage contracts and assess the property to ensure there are no old mortgages or liens on the property. While your lender’s lawyer can do some of the work, it’s a lot of paperwork and you need to ensure everything is verified to completion with your own lawyer, and you’re responsible for the bill. Lawyer fees can be quite hefty and do include HST where applicable.
Land Transfer Tax: 0.5 to 2% of Property Value
Land Transfer Tax (LTT) is paid by everyone who purchases property. LTT is a marginal tax you must pay to the province when “buying land” or, simply put, just purchasing a house or condo. Land transfer tax must be paid once the transaction has been closed, to a max of up to 30 days after closing.
Every province has their own land transfer tax, except for Alberta and Saskatchewan. However, home buyers in these provinces still incur a small transfer fee. Furthermore, certain municipalities, like Toronto, have an additional municipal land transfer tax.
Most provinces use a multi-tiered system to calculate your tax owed. For example, in Ontario, if you buy a home for $250,000, 0.5 per cent is paid on the first $55,000, and one per cent on the remaining $195,000. So on a $250,000 home you would end up paying $275 + $1,950, for a total of $2,225 in land transfer taxes.
Harmonized Sales Tax (HST): Dependent on Province
Harmonized Sales Tax (HST) is the 13 per cent provincial sales tax applicable in Ontario. HST is applied to the purchase price of all new homes, but not to resale homes. It’s also applied to all services, including your lawyer fees, your real estate professional’s commission, the home inspection, and your moving costs.
New Home Warranties
If your home is a new development (it’s not a resale home and you’re the first owner), warranties protect your investment. New home warranties are mandatory in Ontario, British Columbia and Quebec. It is a one-time fee of a few hundred dollars, depending on coverage and price of the house.
Title Insurance – $300
Though not required in all provinces, title insurance protects you from such things as title defects, errors or omissions. This includes errors in the public registry and existing surveys. Title insurance also protects you from undisclosed heirs who may try to claim your property and/or fraudulently discharged mortgages. Although it depends on the property type (resale, new, condo) and the purchase price, title insurance usually costs approximately $300. The cost is minimal and well worth the peace of mind. Ask your lawyer for more details.