It’s exciting buying a home. All the waiting and saving is about to pay off. From setting up the down payment and upholding your credit score to finding the perfect home, you’re about to become a homeowner.
As great as it sounds, many new homeowners don’t expect to be hit with the fees, costs, charges, and taxes that come hand in hand with buying a home. It’s not just a down payment you have to account for. There are also inspection fees, land transfer taxes, title insurance, mortgage insurance, real estate lawyer in Toronto fees, and more. It adds up to a sizable amount.
These are costs often disregarded by real estate agents as they’re focused on other things relating to closing the sale of your future home. In this article, you will find all you need to know about the extra charges that you will inevitably have to pay when becoming a homeowner.
A home inspection allows you to get a glimpse into a property’s flaws, structural and otherwise. It may just save you thousands in the long run and allow you to make an informed decision on whether to buy or not.
Though it’s not mandatory, a home inspection will put your mind at ease about anything that could be wrong that you don’t see at first glance. No one wants to buy a home only to find out that you may need to spend more money on fixes and renovations a few months after closing.
Be smart. Get a home inspection done. A home inspection fee ranges from $200 to $600 on average.
The average land transfer tax is 0.5% to 2.5% of your property’s value. The exact amount is dependent on your purchase price.
The land transfer tax is a one-time fee paid on the closing day of the sale to the provincial government. Any time you buy a house or condo, this tax is applied. It is the responsibility of the buyer to take care of it.
If you are a first-time homebuyer in Ontario, you may be eligible to have all or part of the land transfer tax refund.
You are liable for any HST charged for the purchase of a new build or condo in Ontario. The Harmonized Sales Tax is levied at 13% total, with 5% being federal and 8% provincial. Fortunately, the resale of a residential property is exempt from HST.
Any seller is responsible for HST on commissions and legal fees relating to the sale of the home. Buyers are subsequently responsible for any tax relating to the home inspection, moving costs, and legal fees.
If it is a new build and is not a ‘resale home’ or a previously owned home, in that case, the purchase is not HST-exempt. Any initial home purchase must have HST paid on top of what’s already being paid for the property. Please note there may be HST rebates available under certain conditions. Consult with a real estate lawyer for further details.
Most lenders require a borrower to have title insurance. Buying a home is a massive investment, and you want to protect yourself against any liabilities that may arise around your property. Title insurance is that protection.
The types of things title insurance protects a homeowner from include:
Title insurance protects you and the lender from these types of losses on the property, and guarantees that you can enjoy your property free from any claim on the land or attempts of fraud relating to title ownership.
Mortgage insurance is mandatory for any Ontario property purchased with a down payment of between 5% and 19.99%. It is issued by insurers, i.e. the Canadian Mortgage and Housing Corporation (CMHC), Sagen, and Canada Guarantee.
Mortgage insurance is calculated at between 0.6% and 4.5% of your mortgage. It protects the lender if you default or if circumstances arise where you can no longer make mortgage payments.
The buyer is the one who will end up with the costs. Your mortgage is:
purchase price – down payment + mortgage insurance premium
The premium is deducted from mortgage proceeds together with tax on the premium. Then the periodic payment is calculated based on the mortgage and insurance premium. In some situations, the lender might take out the payment and physically make the payment but the buyer’s going to pay them back through upfront and amortized payments in the end.
Property insurance protects your policies from a wide variety of liabilities. Different property insurance policies exist, offering compensation and coverage on things like floods and earthquakes, theft, property damage, personal injury, and others.
Accidents happen. They can cause permanent damage to your property or compromise the structural integrity of your home. Don’t skimp out on property insurance. If you do, you become responsible for any associated costs that come from the unexpected. None of us know what’s around the corner. Ensure you don’t lose out on your investment.
As the owner, a property insurance policy will protect you. Property insurance in Ontario is on average $1,250 per year, though this is dependent on the location of a property, size, and other factors.
An appraisal is a one-time fee of usually between $250 and $350 charged by the lender to the borrower. An appraisal determines a property’s lending value. Lending value can be different from purchase value.
A real estate lawyer will verify your paperwork and ensure the home buying process adheres to the technicalities and legalities involved. They make for an extremely helpful resource and provide you, the buyer, with the peace of mind in knowing you’re involved in a sound transaction.
A real estate lawyer fee can vary from $600 to $2,000. Most of this fee is used to do things like checking the property’s history to verify there aren’t any current claims on it, to ensure there are no liabilities associated with the title, and to calculate accurate land transfer and property taxes and potentially provide means of offsetting some of this cost through government programs.
A real estate lawyer will help communication information to the client from the lender, simultaneously working with you to ensure everything you expect is included, verifying the wording, and confirming the legitimacy of the agreement. The bank also has an important role to play in this.
Real estate remains as one of the best investments in Canada, offering you tax breaks as a first-time homebuyer in addition to potential cash flow if you use it wholly or partly as a rental, appreciation over time, as equity it can be leveraged to purchase more property, grow your wealth, and more.
Don’t let the costs, taxes, and fees get you down. When you buy a home, these costs are well worth it. To ensure you are correctly paying these fees and ensure you aren’t leaving any untapped resources, speak with a real estate lawyer today. They can advise you on any and all taxes and fees as well as provide insight on any rebate programs that you may qualify for.
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