When you decide to purchase a new home, there will be costs to pay beyond the down payment and mortgage that you need to budget for. A few of these costs or disbursements occur at the beginning of the home buying process, but most of them will be due at the end as part of finalizing your home purchase. Many of the costs are outlined here below and can be discussed further with your real estate lawyer in Oakville or Burlington at Feltmate Delibato Heagle LLP.
Home Inspection Fee
A professional home inspection entails a written report of the condition of the structures and systems that make up the home. A home inspection is not a requirement for your residential real estate transaction in Oakville, but is a common condition you can make in an offer to purchase a resale home. You may also desire a home inspection for a newly constructed home before the end of the one year anniversary so you are aware of any builder’s deficiencies that need to be redressed through Tarion Warranty Corporation. A fee of approximately $500 can be anticipated.
A property survey indicates the measurements of the land you are purchasing, the position of major structures (e.g., the home) and any registered or visible easements (e.g., the driveway) or encroachments (e.g., a neighbour’s fence or tree) on the property. The cost is approximately $750 - $1,000.
Property Valuation Fee
If you need financing, a property appraisal will be needed by the lender to determine the property’s value for the mortgage amount. The cost is approximately $150 - $200. This value is often not the same as the purchase price of the home but it gives the lender an estimate of the home’s minimum value in the event that resale or insurance claim needs arise.
Title insurance is optional but highly recommended as it insures you against loss due to defects or existing liens against the property’s title (e.g., undischarged mortgage), encroachment issues (e.g., a neighbour’s shed is on your property and needs to be removed), title fraud, and errors in surveys and public records for the period of while you own the property. The cost is approximately $250.
Mortgage Loan Insurance for High Ratio Mortgages
If you have less than a 20 percent down payment for the home at the purchase, then you will be required to buy mortgage loan insurance (e.g., from the Canada Housing Mortgage Corporation). This insurance protects the lender in the event that you default on the mortgage. The cost is a one-time premium of between 0.5 percent to 2.75 percent of the principal plus any applicable fees and taxes and can be added to the principal amount of your mortgage.
Home Property Insurance
Home insurance is required by a lender if you need financing for the home as it protects both you and the lender. The cost is about $450 - $1,000 per year. If you don’t need financing, then home insurance is not necessary but is recommended as it insures the structure and contents of the home if damage occurs (e.g., fire, theft, vandalism) and also provides you with third party liability insurance. Damage caused by flooding and water seepage that enters from outside the home (e.g., melting snow or ice) is generally not included in a standard home insurance policy but is an optional protection you may want if you have a finished basement.
Mortgage Life Insurance
Mortgage life insurance is optional and protects you financially by paying off your mortgage up to a maximum of $500,000 in the event that you or your spouse prematurely die. The premium varies by age, mortgage amount, and other factors, and it can be included in your regular mortgage payment.
Land Transfer Tax (LTT)
The Ontario LTT is applicable to all purchasers of real estate, and not the sellers. Currently, the Ontario LTT is 0.5 percent up to and including $55,000, 1 percent above $55,000 up to an including $250,000, 1.5 percent above $250,000, 2 percent above $400,000 where the land contains one or two single family residences. In some municipalities (e.g., Toronto), an additional LTT applies. Some limited exceptions and refunds to the Ontario LTT exist, for qualifying first time home buyers (up to $2,000), if transfer of the title/ownership is to a spouse or if the transfer of the title/ownership is from a trustee to a beneficiary.
Harmonized Sales Tax (HST) (where applicable)
If you purchase a new home or substantially renovated home as your primary place of residence, 13 percent HST is applicable. HST otherwise does not apply to resale homes. An HST rebate of up to $24,000 of the provincial portion (8 percent) of the HST is available. However, typically a builder assumes that you are eligible for the rebate and assigns it back to the builder in the purchase agreement. Your lawyer can check about your situation.
Prepaid Property Tax and Utilities
You must reimburse the vendor for any property taxes or utility bills already prepaid by him or her when you take over home ownership. These costs can range from $400 - $500 and will be including the final cheque requested by your lawyer for the closing.
You must pay interest on the gap between the closing date of the purchase and the first mortgage payment date. The cost can range from $100 to $1,000. Paying this interest adjustment at closing can be avoided if you arrange to make your first mortgage payment exactly one payment period after your closing date.
Legal Fees and Related Disbursements
Legal fees vary from one real estate lawyer in Oakville to another and are subject to HST. The related disbursement costs are outlays of administrative expenses (e.g., the cost to register the deed and mortgage, making photocopies of documents). A combined total of $1,300 - $2,500 is common.
There are several other costs to be aware of in a real estate transaction, such as moving, storage and mail forwarding costs that could apply to you. You may also opt to have a lock-smith change the locks and may need window coverings, furnishings and a fence around the property.
Ongoing costs you can expect include the mortgage, mortgage life insurance (if purchased), property taxes, condo maintenance fees (if applicable), monthly parking fees (if applicable), home insurance and home repair costs.
The costs related to your real estate transaction and home purchase generally may seem overwhelming at times but they cannot be avoided and need to be planned for. Our role as real estate lawyers is to inform you of your potential costs so you can budget without unexpected surprises.
The Oakville and Burlington Real Estate Lawyers at Feltmate, Delibato, Heagle LLP
A residential real estate lawyer in Oakville or Burlington at our firm can act for you. We represent clients daily for their real estate needs. We will advise you about the laws applicable to your situation and represent you legally with the vendor and their real estate legal representative. We handle each transaction with skill and experience to make the closing occur as smoothly as possible. Contact us today at 1-800-636-6927.