Buying your first home is an exciting process. You got the pre-approval from a mortgage broker, you made a decision on the type of house and the location, you saved up for your down payment, you and your REALTOR® found the perfect home and your offer was accepted. While the purchase price of your home is the largest cost you will encounter, there are other costs involved when buying a home.
It's a good idea to budget some extra cash to cover the cost of obtaining a mortgage and "closing" your real estate transaction. Below are some extra cost items you should consider:
Appraisal fee - $250-$350, but the bank may waive it
Mortgage lenders will usually loan a percentage of the home's purchase price or the market appraisal of the property, whichever is lower. The appraisal is either done by someone on the lender's staff or by an outside professional approved by the lender. The cost of the appraisal is most often the responsibility of the home buyer.
Application fee - $250-$350, but the bank may waive it
Find out whether or not your lending institution charges to process your mortgage application. In many cases, if you are dealing with a bank that you have other accounts with, they will waive the application fee.
Land survey fee - $1000 - $1500 if necessary
Lenders sometimes require a survey of the property you intend to buy. On properties located in subdivisions in urban areas, lenders often accept an existing survey, depending on when it was done. However, if there is no existing survey, be prepared to pay a substantial fee for a new survey.
Home inspection fee - $275-$400
Home inspection is usually one of the conditions in the offer. Some sellers have a home inspection done prior to listing their property which will give them an idea of what needs to be fixed so that the property can be priced right. Some lenders require a professional home inspection before they forward the funds. Some insurance companies conduct a home inspection prior to granting insurance coverage. Home inspection is therefore an important part of the real estate transaction.
Legal fees - normally $900 to $1400
You will need to pay your lawyer to arrange your mortgage as well as for "disbursements" such as title search, title insurance, drawing up the title deed and preparing and registering the mortgage.
Land transfer tax - varies, but on a $100,000 home, costs about $750
This tax is payable by anyone who purchases property in Ontario. A REALTOR® or lawyer can help you calculate how much tax you will pay on your purchase. If you purchase a property in City of Toronto, you are also required to pay the Toronto municipal land transfer tax.
HST
If you are buying a new home from a builder/developer, you will be required to pay HST on the price of your home. HST does not apply to most resale homes.
Insurance - ranges from 0.5% to 3.75% of the mortgage amount
There are several types of insurance that may be required when buying your home. If you are arranging a "high-ratio" mortgage (less than 20% down payment) you will need to purchase mortgage loan insurance. Mortgage lenders require you to carry fire and extended coverage insurance that exceeds the amount of the outstanding balance of the buildings. Other insurance you may want to consider include title insurance and life insurance.
Other costs
You will likely have to make property tax adjustments and interest adjustments on utility bills, heating oil etc. Ask your REALTOR® to explain these additional costs so you have no surprises on closing day.
Maintenance and utility costs
Finally, be sure to budget for heating, electricity, water and any immediate renovations you may have planned. It's a good idea to put aside any spare cash and contribute regularly to a maintenance fund so you will be prepared for any repairs or upgrades you need to make along the way.
If you have any further questions regarding closing costs or buying your first home, please contact me by using the form below. Your confidence in me is greatly appreciated.
