Hidden home buying costs can add thousands to your real estate bill. Budget carefully before you buy.
Saving for a home in places like Toronto and the Greater Golden Horseshoe can take years. Putting aside a down payment, finding a home you can afford in a place you want to live — it all takes planning.
Have you planned for the hidden costs of home buying?
Average Home Buying Prices in the GTA
Pent-up housing demand and a robust economy often drive home prices way up in major metropolises. With average selling prices topping $1.1 million for single detached homes and condos in the Greater Toronto Area, home buying can seem beyond your reach.
Calculating Your Home Buying Budget
Home buying bargains are out there. Have you tried:
Moving a bit further out?
Moving closer in to walk to work and shopping?
Asking family for help with a down payment?
Moving in with family to save for the down payment?
Going bigger to rent out spare rooms, or a basement suite?
Sharing a mortgage with friends?
Building co-housing to make new friends?
It all helps, plus first time buyers get extra incentives.
Making a Deposit
Before you get the home of your dreams, have you got the deposit? Home sellers want proof you’re a serious buyer. You can pay up front when you make an offer, or 24 hours after it’s accepted. Expect to put down 2% to 5% of the sales price.
Depending on how your agreement of purchase and sale is written, you may get it back if the deal falls through. Or forfeit the full amount if you walk away without just cause.
Axess Law real estate lawyers (Toronto area or Ottawa) review your offer to purchase before you submit it to protect your right to get your deposit back.
Mortgage Origination Home Buying Fees
After a deposit, your mortgage lender may charge a mortgage origination fee right up front. You could pay $100 to apply for a loan or a percentage of the loan amount may be added to your mortgage. Home buying fees cover the cost of processing a loan, checking your credit history with Equifax or others, or a myriad of expenses your lender may charge.
Mortgage Loan Default Insurance
Low-ratio mortgages for buyers with the lowest down payments incur extra charges. Canada Mortgage and Housing Corporation (CMHC), Canada Guaranty, or Sagen Mortgage insurers keep down payments low (under 20%) by requiring insurance premiums.
How it works:
Mortgage insurance is for homes worth under $1 million.
Loan insurance protects the lender’s investment if you default. You lose title to the home and your down payment if you walk away or can’t afford your home.
Down payments for insured mortgages are 5% for the first $500,000, and 10% for the balance of your home’s sales price.
Insurance premiums are currently 0.60% to 4% of your home’s purchase price or value (after improvements or renovations). The more you put down, the less you pay.
Premiums are due when you borrow, or can be stretched over your mortgage’s life (amortization), for up to 25 years.
Property appraisers compare your home’s fair market value to the purchase price based on its size, age, condition, and location. Appraisals cost around $350 to $700. More importantly, you could be asked by your lender to pay the difference between the appraised value and purchase price.
A non-invasive home inspection — meaning visible, accessible inspection and not a review of building code compliance — gives you a professional opinion of the condition and performance of a home you want to buy. Average fees for registered, certified inspectors start at $525 and up.
Mortgage lenders protect the title to your property by adding a title insurance policy, starting at around $250 plus HST. It’s an extra layer of assurance against title errors, fraud or forgery by identity thieves, claims against title by previous owners or a neighbour, or municipal easement that affects your property.
Homeowner’s insurance is obligatory if you plan to mortgage your home. You can’t complete the sale without a home fire insurance binder. How much you buy is up to you.
Mortgage lenders are looking for the replacement or rebuilt value of your home for events like fire or sudden and accidental water damage. Wind storms that tear up the roof or siding are included in most policies. You pay extra for riders like floodplain insurance or overland flooding from snow melt.
Budget an average of $20 to $50 a month for a condo or $80 to $200 for a home. Always check with an insurer to confirm how much your home will cost. Rates are based on age, location, and condition.
Land Transfer Taxes in Ontario
Provincial Land Transfer Taxes
Provincial land transfer taxes (LTT) are due during the closing transaction. Axess Law pays the tax while finalizing your property purchase. Your LTT is based on the purchase price of the land your home is on, plus any mortgages or debts you assume when home buying, not the appraised value.
Taxes are calculated on a graduated scale, from $275 for the first $55,000 (0.5% of purchase price) up to 2.% for balances over $400,000. Axess Law calculates the amount owing for you.
Municipal Land Transfer Tax for Toronto Buyers
MLTT is an added cost for Toronto residents. You pay in increments based on your home’s value, from 0.5% for the first $55,000 up to a top rate of 2.5% for homes valued over $2 million. Average Toronto home buyers pay 1% on the difference between the first $55,000 and next $250,000, 1.5% for any amount between $250,000 and $400,000, and 2% on remaining balances up to $2 million.
Foreign Buyers’ Taxes
Foreign buyers are subject to federal and provincial taxes that encourage using purchased properties as rentals or principal residences. See who pays land transfer taxes in Ontario.
HST You Owe
HST or harmonized sales tax is paid when you buy a new home (13% of the purchase price), on legal fees and disbursements, mortgage appraisals, home inspections, property surveys and real estate commissions. Resale homes are exempt. Some housing shares and new, renovated, or rebuilt homes qualify for HST rebates. Ask your Axess Law real estate lawyer (Ontario) if you hope to apply.
Why You Need a Real Estate Lawyer
Axess Law checks land transfer tax affidavits for accuracy, and researches title to the property for liens or debts that could prevent or delay a home buying transaction.
Our real estate lawyers communicate with mortgage lenders on discharging a mortgage in Ontario and finalize new loans. We pay out disbursements, like your share of prepaid property taxes or utilities, to make your purchase legal.
Questions to ask a real estate lawyer or about Ontario real estate law? Check this out.
Affordable Real Estate Lawyers, Anywhere You Are
Access lawyers for less in Greater Toronto Area, Ottawa, or anywhere in Ontario when you buy, sell, or transfer property. Axess Law’s flat fee real estate lawyers are affordable, and our rates are all inclusive (excluding taxes, disbursements, and third-party charges). Axess Law offers you only the legal services you absolutely need. Your final invoice includes no surprises or hidden charges. Your itemized statement of adjustments is explained when we deliver it, and we answer any questions you have about it.
Find a real estate lawyer in Ontario.
Real Estate Lawyers When You Need Us
Axess Law can go online via videoconference anywhere in Ontario, or meet you in person at our Greater Toronto Area or Ottawa law offices. We have a mortgage lawyer near you available 7 days a week, day or evening, to refinance homes. Our cheap real estate lawyers close any real estate transaction quickly and without a fuss. Make appointments online using our easy booking form, or call our 647-479-0118 lawyer line (1-877-402-4277 toll free) for times that suit your schedule.