The Costs of Buying a Home – It Adds Up!
The cost of buying a home is always more than the purchase price. Knowing what to expect ahead of time can help you to be financially prepared. By familiarizing yourself with the list below, nothing will come as a surprise on closing day.
Home Inspection Fee – $350 to $600
More frugal buyers will try to cut costs by skipping the home inspection, but the fee is minimal in comparison to what you might have to pay later without one. Some lenders will actually require a professional inspection before issuing you a mortgage. Depending on the size of the house, expect to pay anywhere from $350-$600 for the home inspection.
Related Read: Home Inspections 101 – How to Hire Your Pro>
Appraisal Fee – $300 to $500
Mortgage lenders will advance only a percentage of either the appraised market value of a home, or the home’s purchase price – often, the lesser of the two. Either way, the appraisal fee, which costs somewhere between $300-$500, often comes out of your pocket. Although waived by most lenders, some will charge a financing fee, depending on your credit record. Their fees vary from one lender to another.
Property Insurance – $700 to $900
Your lender will also expect you to insure their investment. Property insurance, beginning on the day of closing, costs approximately $700-$900 for minimum coverage.
Land Survey – $1,000 to $2,000
Some lenders may ask for an up-to-date survey before finalizing the mortgage. In many cases the seller will pay this cost in order to facilitate the sale. Land surveys cost somewhere between $1000-$2000.
Mortgage Insurance – 1.25 to 3.85% of Mortgage Value
If you are applying for a high-ratio mortgage (a mortgage where the borrower has less than a 20% down payment), you will be required to buy mortgage insurance. This type of insurance protects the lender.
Mortgage default insurance is calculated as a percentage of the total mortgage amount. It varies based on the size of your down payment and the length of your amortization period. You will pay between 1.80 – 1.25% if you have a down payment of 15.00-19.99% and an amortization of 25 years or less.
Home Insurance – $750 – $950 Annually
Mortgage lenders will also require that you protect your home with fire and extended-coverage insurance. This coverage ensures you can replace your home in case it is destroyed, and also protects the home owner from liability.
Title Insurance – $300
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 its price, title insurance usually costs approximately $300. The cost is minimal and well worth the peace of mind. Ask your lawyer for more details.
New Home Warranties – $200
New home warranties are mandatory in Ontario, British Columbia and Quebec, and protect your investment. Its cost is a one-time fee of a few hundred dollars, depending on coverage and price of the house.
Land Transfer Tax – 0.5 to 2% of Property Value
Land transfer tax is collected on properties that are changing owners. Unfortunately, it has to be paid by the buyer. The percentage ranges from 0.5% to 2%, depending on which province you live in. Most provinces use a multi-tiered system.
In Ontario, if you buy a $250,000 home, 0.5% is paid on the first $55,000 and 1% on the remaining $195,000. On a $250,000 home you would end up paying $275 + $1950, for a total of $2225 in taxes
Harmonized Sales Tax (HST) – 13%
The Harmonized Sales Tax is not in effect in all provinces across Canada and each province has a different rate. In Ontario, HST is 13%. It affects certain agreements, such as the purchase and sale agreements for new homes. It does not, however, apply to pre-owned residences for re-sale. HST has been added to such services as the real estate commission, lawyer’s fees, moving costs, home inspections and home staging.
Legal Fees – $500 to $1000
Your lawyer will play a very important role in the final transaction. They will do a title search, register and prepare the mortgage and draw up the title deed. While your lender’s lawyer can do some of the work, however, your lawyer will take the lion’s share – and you get to foot the bill. You can usually save money by having your own lawyer draw up the mortgage. Expect to pay anywhere from $500-$1000 in legal fees, depending on the services provided.
Utilities and Taxes
You may have to reimburse the previous owner for utilities or taxes if they were paid beyond the closing date. Referred to as adjustments, they include hydro, water and property taxes.
Moving costs vary, depending on your personal preferences. Although it can be stressful, you can save a lot of money if you take the do-it-yourself route. But don’t forget to include the cost of a rental truck, if necessary. Alternatively, you could hire a moving company to do the work for you. Again, costs vary, depending on whether or not you want them to pack for you, or simply move your belongings.
Other Costs to Consider
The following costs might apply to your situation, so consider them carefully as they may have an impact on your budgeting:
- Renovations or repairs
- Service hook-up fees
- Condominium fees
- Gardening expenses
- Snow-clearing equipment