Saving for the Down Payment is Only One Part

1. Paid on Closing Day (the expenses settled with your lawyer before you get the keys)

Land Transfer Tax (LTT) - sliding scale based on home price

This is the most frequently either forgotten or unknown expense for those purchasing a home. Whenever keys change hands in Ontario, a provincial land transfer tax is imposed on closing. The amount is based on a sliding scale (0.5% on the first $55K, 1% from $55K to $250K, 1.5% from $250K to $400K, 2% from $400K to $2million, and 2.5% on anything over $2million). For example, the land transfer tax on a $500,000 home would be $6,475 (minues $4,000 if you're a first time buyer). If you're purchasing in Toronto where they also have the Municipal Land Trasfer Tax (MLTT), your total would be just about double for a home outside of Toronto. 

Legal Fees - roughly $1,500-$2,500

Acquiring a real estate lawyer is a necessity in Ontario, as they handle the title search (confirming current ownership, legal description, identifying any liens or debts, mortgages, or registered restrictions attached to the land), transfer deed registration, and coordination with your lender. Their fees could vary depending on any additional costs incurred on your behalf. 

Title Insurance - $200-$400 

This is requested by most lenders and is a one-time fee that protects you from fraud, zoning violations, or unpaid property tax liens. 

Statement of Adjustments - varies, but a safe buffer is $500-$1,500

If the seller has prepaid any expenses that carry over past the closing date, such as property taxes or condo fees, the buyer is responsible for reimbursing them on a prorated basis. 

2. Before and During Purchase (out-of-pocket expenses while your deal is being finalized)

Home Inspection - $350-$600

While a home inspection is considered an optional expense, as I've mentioned in other posts, the importance of having the home's roofing, electrical, plumbing and structural integrity evaluated cannot be overstated. 

Mortgage Appraisal Fee - $300-$600

Your lender will want to know that the home is worth what you have agreed to pay, so they will send an appraiser to evaluate it, before they agree to lend. It wouldn't hurt to ask the lender to waive the fee or if it can be tied into your mortgage. The worst they can say is no. 

3. Hidden Structural Costs

CMHC Premium Tax (8%)

If your down payment is less than 20% of the purchase price, Mortgage Default Insurance (or CMHC insurance) must be purchased. The good thing is that this premium is rolled into your monthly mortgage payments. The not-so-good thing is that the tax on that premium (the 8% noted above) cannot be financed and must be paid up front on closing day. 

HST on New Builds (13%)

While resale homes do not have HST applied to the purchase price, brand-new builds (or a home that is over 90% substantially renovated) are hit with 13% HST. While there are new government rebates in effect, and some yet to be fully factored in, be sure to use the cooling off period after signing your contract with a builder to have your lawyer review whether or not you are to apply for the rebate or if the builder takes it on. 

There can be a lot of surprises when you are in the market for a new home, which is why it's always best to partner with a trusted real estate agent who can guide you through the process. If you have a question that hasn't been covered in one of my blogs, or if you have a topic that you think may be helpful for buyers and sellers like yourself, my contact information is at the bottom of the page.