Buyer’s Costs

When buying a home, there will be costs you need to budget for at various steps in the process -from putting in an offer, to firming up the deal, to closing. These include:

 

Deposit

The deposit is a requirement at the Agreement of Purchase. The amount is negotiable between buyer and seller and usually increases with the value of the property. It is usually held by the listing brokerage in a trust account until the completion of the sale and will form part of your down payment.

 

Down Payment

This might be one of the more obvious costs, but it is a significant one. A down payment on your new home can be as little as 5% to as much as 25%. Note that putting down 20% avoids a Mortgage Insurance Fee, commonly known as a CMHC Fee.

 

CMHC Insurance Fees

Mortgage insurance is calculated as a percentage of the loan and is based on the size of your down payment. The greater the percentage of the amount you borrow, the higher the percentage you will pay in insurance premiums. Premiums can vary dependent on your financial standing and employment. These can be added to the loan amount.

5% down payment       2.75% premium

10% down payment     2.00% premium

15% down payment     1.75% premium

20% down payment     1.00% premium

25% down payment     0.65% premium

35% down payment     0.50% premium

 

Harmonized Sales Tax (HST)

All services, including legal fees, home inspections, appraisals, labour for renovation , moving costs and real estate fees, are subject to HST (HST rate in Ontario is 13%).

HST applies to new homes priced over $400,000 as well as on substantially renovated homes.

The federal government offers a GST/HST New Housing Rebate program which provides a rebate on part of the GST or the federal part of the HST paid on the construction or purchase of most newly constructed or on substantially renovated houses when used as a primary place of residence. See Revenue Canada for clarification on ‘substantially renovated’. http://www.cra-arc.gc.ca/E/pub/gm/b-092/b-092-e.html#PP48D6095

 

Land Transfer Tax

This is a mandatory provincial tax payable on all home purchases made in Ontario. The calculation is as follows:

0.5% of purchase price on the first $55,000
PLUS 1.0% of purchase price from $55,000 to $250,000
PLUS 1.5% of purchase price form $250,000 to $400,000
PLUS 2.0% of purchase price over $400,000

For example:

Purchase price of $500,000 = $275 plus $1950 plus $2250 plus $2000 = $6475 Land Transfer Tax

For more information visit Ontario Ministry of Finance Land Transfer Tax http://www.fin.gov.on.ca/en/tax/ltt/

Attention First-Time Home Buyers!   You may be eligible for a land transfer tax refund up to $2000. Visit Land Transfer Tax Refund for First-Time Home Buyers http://www.fin.gov.on.ca/en/refund/newhome/ to find out how.

 

Legal Fees

Legal fees will vary and include title searches, registration of the mortgage, obtaining title insurance, deed registration, and anything else that may be required to complete your transaction.

As a general rule, you should budget 1.5% of the purchase price to cover all associated costs (other than downpayment).

The following provides an example:

LAWYER LEGAL FEE: $800 – $1000
TITLE SEARCH: $150 – $180
REGISTRATION OF DEED: $71
REGISTRATION OF MORTGAGE: $71
EXECUTION CERTIFICATES: $33  – $55
TITLE INSURANCE: $250 – $350
OFFICE EXPENSES: $40 – $50
LAND TRANSFER TAX                       Fees based on purchase price

 

Real Estate Commission

When buying a home, the real estate commission involved with your purchase is usually incorporated into the purchase price and therefore paid to your REALTOR® by the seller. Should there be any exception, the fee structure would need to be discussed with you and approved in advance.

 

Home Inspection

The cost will vary between firms and credentials of the inspector. Costs may also be greater if the scope of the Inspection is more specialized (unique or older properties) or if the property is large. On average the costs are $400 – $600.

For more information or to find a home inspector in your area visit Ontario Association of Home Inspectors  (http://www.oahi.com)