Purchasing a home is an exciting milestone. In your excitement, though, don’t ignore practicalities — like how much cash you’ll need. The hidden costs of buying a house in Ontario can amount to quite a sum (and that’s on top of the down payment you’ve carefully put together), so be prepared.
How much will you have to pay for these hidden costs? To find out, we consulted Paula Riopelle, Selling Partner/Sales Representative with the Paul Rushforth team. NOTE: All costs mentioned in this article are approximate only and are subject to change.
Penalty on Current Mortgage
Cost: varies according to your specific situation
If you’re thinking of selling your current home to finance a new purchase, you will probably need to break your existing mortgage.
Penalties can be quite high. For example, your current mortgage agreement may include an interest rate differential penalty. If you signed at a high interest rate and now it’s dropped, you’re on the hook for the rest for the term.
Contact your mortgage lender to find out what the penalty will be before you consider looking for another home. The answer may affect the price bracket you’re interested in – or even your decision whether to move ahead with purchasing at this time.
Inspection involves a physical examination of the house or condo by a qualified home inspection of your choice. The cost is approximately $500 for a city home, or $1,500 for a rural property (which usually requires septic inspection and well inspection/water inspection). While it can be tempting to forego inspection in a hot sellers’ market, the process could save you thousands of dollars if major problems are found. The inspector also can provide valuable information about minor issues and how to deal with them.
Cost: usually 5%+ of purchase price
Often, once you have an accepted offer to purchase, you will have to come up with a deposit, payable by certified cheque, within 24 hours, so be sure to have the funds at the ready. The amount is typically 5% or more of the agreed-on price.
Cost: $300-$350, or possibly more depending on the location or size of the property
In addition to your property inspection, the home will be looked at by a professional appraiser to determine its lending value, which is distinct from purchase price. Although the appraiser is commissioned by your bank or other mortgage lender, usually you as the buyer pays the cost. However, sometimes a lender will waive your appraisal fee, in an effort to secure a long term mortgage with you.
Cost: based on purchase price and down payment size.
If you are not able to put down 20% or more, you will need to take out mortgage default insurance. The insurance premium is typically rolled into your mortgage, which will affect your monthly payment amount. Cost is calculated based on the property purchase price and the size of your down payment; see the CMHC Mortgage Loan Insurance chart.
Cost: $2,000 for you as the purchaser (seller pays $900)
You’ll need a real estate attorney to perform the necessary legal work associated with your purchase.
The fee includes:
- Title Insurance
- Search Cost
- Registration Cost
Land Transfer Tax
Cost: see below
The Land Transfer Tax is graduated, based on the amount of the purchase price. The rates are:
- Up to $55,000: .5%
- $55,000 – $250,00: 1%
- $250,000 – $400,000: 1.5%
- $400,000 – $2,000,000: 2%
- Above $2,000,000: 2.5%
To quickly compute your land transfer tax, use this handy calculator.
Qualified first-time home buyers get a break on the transfer tax in Ontario, with a refund of up to $4,000.
Cost: $1,000 and up
The amount you’ll pay to move varies widely. Two important factors are the amount of furniture and other possessions you have to move and whether you hire a company that’s insured or not (we definitely recommend insured!).
To help our clients cut costs, our business offers you our own free moving truck. All you need to provide is a driver and a crew to haul the furniture!
How A Real Estate Agent Can Help
We don’t have a magic wand that can eliminate the hidden costs of buying a home but we can help. As agents knowledgeable and active in the Ottawa market, we come into frequent contact with other real estate professionals, such as home inspectors and lawyers.
We know from experience which professionals provide quality services. We also know which ones to avoid in various situations.
Every home purchase is different. Count on us to help by pointing you in the right direction when it comes to the real estate service providers you will need for your unique situation.
Call Us At 613-788-2122 or Contact Us Online.