There are many costs involved in buying a property and it is important to know what to expect and to budget accordingly. Here are some costs associated with closing that you may not be aware of:
Home Inspection – Although not mandatory, getting a home inspector, engineer, or contractor to do an inspection can help you avoid expensive problems in the future. Use it as an insurance policy for your home.
Home Appraisal – In order to provide financing, your mortgage lender might require you to get a bank appraisal of the property to confirm the value of the home. Knowing the value of the home you wish to purchase ensures you do not over-extend yourself financially.
Real Estate Lawyer– Involving a real estate lawyer early on can be helpful – especially if you are buying a newly constructed home. The lawyer can help you identify unexpected costs and review the Agreement of Purchase and Sale before you sign.
You will need to pay legal fees to handle various documents. Your lawyer will do a title search on the home to ensure the sale can actually be made. They will also register the deed and mortgage for you.
Land Transfer Tax – The Land Transfer Taxes in Toronto vary depending on the type of home you are purchasing.
There is an Ontario Land Transfer Tax, but Toronto has a municipal land transfer tax as well. If you are a first time homebuyer, you may be eligible for a refund for all or part of the tax, so check with your real estate agent. Here is a great resource for more details on this tax: http://www.fin.gov.on.ca/en/tax/ltt/
Insurance – There are three different insurance policies associated with the closing process:
- Home Insurance – necessary for your lender to release funds to you.
- Title Insurance – not necessary, but a good way to protect yourself against title fraud, survey errors and encroachment issues.
- Mortgage Insurance – If your mortgage down payment is less than 20 per cent of the sale price, mortgage insurance will be necessary.
Costs to Consider When Buying a Newly Constructed Home:
- Tax – When purchasing a newly constructed home, it is subject to the 13 per cent Harmonized Sales Tax. Even if you are eligible for government rebates, the tax still needs to be paid upfront.
- Builder Fees – There may be unexpected costs that need to be paid to the builder. It is wise to have a lawyer review your Agreement of Purchase and Sale to advise you of any costs. These costs can include development fees and extra funds for a condominium’s reserve fund.
- Tarion Enrolment Fee – New homes are covered by a warranty program run by Tarion. This fee is sometimes included in the purchase price but other times it may be payable at closing.
It is a good idea to do research and read over all documentation – making sure you can budget for all the expenses involved in buying a new home. This way you are protected and informed at every step of the way, and an informed buyer or seller makes the best decisions.
Royal LePage Real Estate Services Ltd., Brokerage
Central Toronto branch
P.S. Do you have any questions about costs associated with the purchase or sale of a property? Contact Elli Davis at Royal LePage here to get the information you need for your next big investment.