While the purchase price of your home is the largest cost you will encounter, there are other costs to prepare for when buying a home. Cost may vary depending on the transaction but typically buyers should budget approximately 2-3% of the purchase price for closing costs.
Appraisal fee
When approving a mortgage most lenders will have an appraisal done of the property by an appraisal professional. The cost of the appraisal is sometimes charged back to the home buyer. A typical appraisal can cost around $350.
Mortgage Application fee
If you are dealing with a bank that you have other accounts with they will often waive the application fee. Speak with your lender and find out whether or not you will be responsible for charges to process your mortgage application.
Mortgage Insurance
There are several types of insurance that may be required when buying your home. If you are arranging a “high-ratio” mortgage (less than 25% down payment) you will need to purchase mortgage insurance.
This is for the protection of the Lender in the event that the mortgage is not paid. Mortgage insurance is normally purchased through CMHC (Canada Mortgage and Housing Corporation) or GEMI (GE Capital Mortgage Insurance Canada.) The amount of the mortgage insurance premium is calculated using a loan/value ratio, and may be added to the mortgage amount. The premiums are as follows:
a) 75% to 80% 1. %
b) 80% to 85% 1.75%
c) 85% to 90% 2.00%
d) 90% to 95% 3.25%
e) 95% to 100% 3.40%
Other mortgage insurance costs include an appraisal of $165 as well as provincial sales tax (8%) on the mortgage insurance premium. While the mortgage insurance premium can be added into the amount of the Mortgage, the provincial sale tax on the premium is payable immediately at the time of the mortgage funds being released.
Insurance costs
Mortgage lenders require you to carry fire and extended coverage insurance that exceeds the amount of the outstanding balance of the buildings. Other insurance you may want to consider include title insurance and life insurance.
Land survey fee
Lenders require a survey of the property you intend to buy. If the survey is recent lenders will often accept an existing survey, however, if there is no existing survey, be prepared to pay a substantial fee for a new one.
If the Buyer requires a survey for the lender and the Seller does not have one, it is the responsibility and the expense of the Buyer not the Seller to have a new one prepared by an Ontario Land Surveyor. Title insurance will take care of the problems incurred in the absence of a survey or an up to date survey.
Lawyer Fees (Disbursements)
Buyers are responsible to pay for certain fees incurred by their lawyer in respect of various searches
and registrations. These may include: registration of the deed and mortgage, municipal and utility searches, title insurance, abstract of title and execution certificate, transaction levies as well as various administration costs such as shipping couriers, photocopies, postage, etc…
It is best to get estimates from a few lawyers, but prices typically are $650 – $1,000.
You will also likely have other costs determined at the closing to make including any property tax adjustments and adjustments on pre-paid utility bills. Example: heating oil remaining in the tank when you move in. These are taken care of by your lawyer and then charged back to you.
Land Transfer Tax
This tax is payable by anyone who purchases property in Ontario. See my Land Transfer Tax Calculator to calculate your costs.
Goods and Sales Tax (GST)
If you are buying a new home, you will be required to pay Goods and Services Tax of seven percent on the price of your home. GST does not apply to most resale homes.
Inspection fees
Homebuyers should choose to have a home inspection done prior to finalizing their offer to purchase. Some lenders make it a requirement to have a home inspection to secure a mortgage. A typical Home Inspection cost around $450. Depending on the property other inspections may also be necessary. For example if you are buying a rural property you should budget for a septic inspection and water test.
Maintenance and utility costs
When calculating how much house you can afford be sure to budget for utility costs such as heating, electricity, water, phone, cable/satellite, internet and any immediate renovations you may have planned.
Disclaimer – Chantal Nephin does not take any responsibility for the accuracy of the costs listed above. The costs are to give you an idea of the approximate expense range but will be different for each transaction. It is best to speak to your financial institution and lawyer about costs specific to your purchase.
