You wouldn’t buy a used car without having a trusted mechanic perform an inspection for you, and a house is no different. Don’t even think about buying a home without first having a proper inspection done. In fact, your lender may insist on one to verify the condition of the home.
It’s an excellent way to learn as much as you can about the various systems in the home, from the furnace and plumbing to the electrical and roofing. The inspection may identify some repairs that are essential, which you and your Team Hawke—RE/MAX REALTOR can either negotiate into the purchase price or insist be completed before you proceed with the deal.
The cost of an inspection starts from #350.00 and depends on the size, condition, and age of the property. But this is money well spent, and is an expense that you simply cannot, and should not, avoid.
Your mortgage lender will require you to have property insurance in place on closing day. Since the property is actually the security against the loan amount, the lender wants to make sure insurance is in place to cover the cost of replacing the home, and its contents, should something happen.
The fees for insurance vary widely, since they depend on the value of the property. Insurance has become a very competitive business in recent years, with new companies entering the market, offering different products and options. Consider using the services of a broker, whose job is to find customers the best deal possible among the companies they represent. You may also be able to get a discount of you use the same company you have your auto insurance with.
Legal fees for buying real estate range in price, depend on your situation and must be paid upon closing. When purchasing brand new condos, since such deals can involve more paperwork, the cost might be higher.
Title insurance is yet another type of insurance you will require. Your lawyer will advise you of this type of protection, which insures you against any defects of title to the property. For example, if the previous owners undertook major renovations of the property without proper permitting, you would be protected against any costs required to bring the house up to code.
Typically, the one-time premium costs less than $500.
Mortgage Loan Insurance
If your down payment is less than 20% of the purchase price of your home, you will need mortgage loan insurance. It protects your lender — not you — in case you default on your mortgage. Premiums are calculated as a percentage of the amount you put down, hanging at the 5%, 10% and 15% thresholds but there is no break for nothing in between. Premiums range from 0.5% to 3% and increase if you are self-employed.
So, to buy a $250,000 condo with a 5% down payment of $12,500, a premium of 2.75% on the borrowed amount of $237,500 would total about $6,500. You can pay this in one lump sum or, as many first-time buyers choose to do, you can add it to your mortgage loan amount. This type of insurance is mandatory for high-ratio mortgages, and is only offered through two carriers: CMHM and Genworth Financial.
One important note is that in Ontario and Quebec, the premiums are subject to provincial sales tax, which cannot be added to the loan amount. So, to buy that $250,000 condo in Ontario, it is your responsibility to pay the the 13% sales tax on the $6,500 premium, or about $845.
Land Transfer Tax
Most provinces have such a tax, though it may be a slightly different name (such as property purchases tax), and the rates vary. Alberta, Saskatchewan, and parts of Nova Scotia do not have Land Transfer Tax (LTT) at all, while other provinces use a tiered system. In the tiered systems, the rate varies depending on the purchase price of the house. Your Team Hawke—RE/MAX REALTOR or your lawyer can advise what the rate would be for the area you’re considering buying in. For more information on LTT, visit ontario.ca/landtaxes.
In Ontario, the city of Toronto has its own municipal land transfer tax, which is applied on top of the provincial one. However, first-time buyers of both new and existing homes receive a provincial tax rebate up to $2,000 and a municipal tax rebate if you purchased in the City of Toronto to a maximum of $3,725. This means a full rebate of the municipal tax for homes costing less than $400,000. Talk to your Team Hawke—RE/MAX REALTOR for more information.
Moving Expenses and Services Connections
When you’re totalling up all the costs of buying your first home, don’t forget to include moving expenses and connection fees for services, such as phone, electricity, and other utilities.
Moving expenses vary widely, depending on your personal circumstances and possessions. As a first-time homebuyer, perhaps you’re moving from an apartment, or even your parent’s home. If this is the case, you may not need the services of a moving company. You could choose the do-it-yourself route and enlist the help of family and friends. If so, ask them or your Team Hawke—RE/MAX REALTOR for a referral for a truck rental company they trust, as this is an area of your move that you want to go smoothly. Don’t be fooled by the price! Reliability is key.
If, however, you do contract moving company, do your homework well in advance; get referrals from your Team Hawke RE/MAX RELATOR and friends and do your own research. Rates and levels of service can vary widely among moving companies, as can insurance coverage, so give yourself lots of time to look into these matters.
Often overlooked are the costs of making sure your services and utilities — such as your phone, electricity, cable TV, and other connections — are up and running for move-in date. Make sure you call well in advance to make these arrangements, and ask about all associated fees. For example, some utility companies require deposits, or charge other fees for new customers with whom they have no billing history.
Harmonized Sales Tax
Beginning July 1, 2010, Ontario and British Columbia implemented a harmonized sale tax (HST), effectively combing the Good and Services Tax (GST) with provincial sales tax (PST). The HST in British Columbia is %12, and 13% in Ontario.