Learn All the Home Purchase Costs
When buying a home it’s important to account for the extra costs that are required to finalize the purchase. There are numerous other expenses that will add to the amount that you’ll need to spend. This purchase price checklist outlines all the costs you can expect upon closing. Please note that they can vary by province and are subject to change.
- Learn All the Home Purchase Costs
- Home Purchase Price
- Land Transfer Tax
- Lawyer’s Fees for Home Purchase
- Registration Fees for Buying a Home
- High Ratio Mortgage Insurance
- Compliance Letter
- Tax Certificate
- Provincial “New Home Warranty Program” premiums — New Homes Only!
- Mortgage Appraisal and Application Fees
- Home Inspection
- Land Survey
- Title Insurance
- Property Tax and Prepaid Utilities Adjustments
- Interest Adjustment (IA)
Home Purchase Price
The good news this is the most expensive piece of your new acquisition. The costs below are either flat fees or a percentage of the purchase price. One benefit, if we can establish this regardless of the cost is that some of these costs can be wrapped into the mortgage. It’s always beneficial if we can stretch our available dollars to something a lot more enjoyable. Though not recommended, you can obtain a mortgage with cash back that can aid with these expenses too…just ask how this can be done.
Lawyer’s Fees for Home Purchase
Although fees vary across the nation, it can cost you up to $1,500 (usually on a purchase it’s a lot less) depending upon whether you are re-mortgaging your existing home or buying new. Contact me or your realtor to help with this process.
Land Transfer Tax
A tax payable to the Provincial Government by the purchaser upon the transfer of title from a seller. This cost is usually not accounted for by most homeowners and can be frustrating to get your head around. It can be sizeable to. The amount varies from province to province and is generally a percentage of your purchase price
Registration Fees for Buying a Home
This is the Fee paid to the provincial government for recording a title transfer, mortgage registration or other instrument such as an Assignment or Lien with the local authorities. Either the bank or your lawyer will take care of this registration.
High Ratio Mortgage Insurance
This is the cost to buy a home where you the buyer are putting down less than 20% of the purchase price on the total value of the property. A sliding fee scale applies, depending on the percentage of the purchase price required in a first mortgage (some minor exceptions).
Obtained by your lawyer and required in many municipalities throughout Canada before a property transfer can take place. This is an acknowledgement from the building department that the property either has, or is clear of outstanding work orders. Work orders are specific clean-up or fix-up requirements that the owner is legally required to do, and which must be completed before ownership can be transferred.
Obtained by your lawyer at the time of sale to confirm that local taxes have been paid up to date. If they are not up to date, the seller is required to pay them from the proceeds of the sale. If there are insufficient proceeds, then you may be legally required to pay the outstanding taxes. If, on the other hand, taxes have been prepaid, you may have to compensate the seller for them.
Provincial “New Home Warranty Program” premiums — New Homes Only!
A third party (provincial) warranty program between a builder and a buyer. With the exception of Ontario and Quebec, membership in such a program is voluntary for the builder. Through these programs, your home is guaranteed against defects for at least one year. All homes with a high-ratio insured mortgage (greater than 80% loan to value) must be enrolled in such a program.
Mortgage Appraisal and Application Fees
Application fees apply on high ratio mortgages only while appraisal fees are common to most mortgages. Generally $250 – 400 each.
A report sequestered by a potential purchaser, usually to verify the condition of a property. This is often used as a condition in the offer which is a recommended and useful tool to give help alleviate that buyer’s remorse that can come with a home. The scope and detail may vary, but most reports outline any particular problems and associated repair costs. Unfortunately, no licensing is required, and this service is not specifically regulated other than by general consumer protection legislation. Your Real Estate agent can often provide a trusted company for this need.
The legal written and/or mapped description of the location and dimensions of your land. The survey should also show the dimensions and placement on the lot of any structure, including additions such as pools, sheds and fences. An up-to-date survey is often required by a lender as part of the mortgage transaction.
New to Canadian consumers over the last few years is the introduction of title insurance into the home buying process. Title insurance can be purchased by home buyers to protect against potential deficiencies in a number of areas, such as the land survey. Ask your lawyer about this.
Some local utility companies (hydro, gas, oil) charge a fee on closing to connect new buyers up to their service. More common, however, is an extra charge on the first billing.
Property Tax and Prepaid Utilities Adjustments
If the previous owner prepaid property taxes or other utilities, they will be credited the prepaid portion on closing. If they paid all their taxes by April, expect a large adjustment cost on closing!
Interest Adjustment (IA)
If you arrange to make your mortgage payments monthly on the first day of the month, and your transaction closes after the first day of the month, your lender will charge you interest on closing to the next interest date, called the Interest Adjustment Date (IAD), when your payment cycle will commence. This can be a sizeable amount, but it is the correct interest you should pay. For example, close on May 15th, you will have to pay 16 days interest on closing and start the regular payments on June 1st.