Cost of Purchasing a home

A guideline of costs to expect when buying a home.

Pre Approval: This stage is the preparation for your down payment.


Focus on what you can control which includes your spending, savings, and expenses.


In addition to creating a budget, research what your expenses will be after home ownership. Homes can have regular and unexpected costs associated that you will not encounter with renting or living with your parents.


The pre-approval process will estimate how much a lender can provide based on your income and availability to pay home-associated fees such as the mortgage, utilities, condo fees, and property tax. Before preapproval, it is recommended to build a strong credit history and pay down any existing debts. Buying a home can happen quickly, and it is important to be prepared for upcoming costs after your offer has been accepted. Depending on the institution dealing with your application, there may be a Mortgage Agent Fee but most large banks do not charge this.


Closing Costs: These are not always accounted for when buying a home and can be up to 10% of the selling price.


A house appraisal usually occurs after a seller accepts an offer on a home and before closing on the sale. It often follows an inspection, and both of these are worthy investments before deciding to purchase a house. An inspection is coordinated and paid for by the buyer to ensure they know the condition of the building and the property. It is the buyer's last chance to discover problems with the house before purchasing and decide if they want to move forward with the transaction. The appraisal confirms the value of the property for your mortgage lender, to ensure the property is not overvalued and can be resold at the purchase price or higher to mitigate the lender's risk.


Realtor fees are paid by the seller. The fees can range from around 5% of your sell price. In addition, you will need a real estate lawyer to protect your rights, making sure that all the terms of your agreement of purchase and sale are complied with and that you receive a clear title to the property. The legal fees can be an hourly rate or a flat rate upwards of $2,000 depending on the complexity of the property. First-time home-buyers might be able to receive a rebate on the land transfer tax, but the tax varies depending on the location of the property. If you purchase a property in Ontario, you will be required to pay the Ontario Land Transfer Tax and some areas have a Municipal Land Transfer Tax on top, such as a house in Toronto.


For example, a home in Toronto valued at $1 million with $200,000 down will have a total land transfer tax of $32,950. If it is your first home purchase, you will receive a rebate of $8,475.


Post Cost: Here are the ongoing costs of owning a home.


Now you have a mortgage that you are paying for monthly or biweekly and those may include Canada Mortgage and Housing Corporation fees. You are required to have mortgage insurance in case you default on your loan with the bank if you have less than a 20% downpayment. For more information on those fees or to calculate your mortgage payments, click here or visit the link below:


https://www.cmhc-schl.gc.ca/en/consumers/home-buying


In addition, if you are in a condo you will have condo fees to maintain any common areas of the property. There will be regular utilities such as heating, electricity, water, and any additional telecommunication services you may want such as the internet or a home phone. You will have regular property taxes based on the assessment value of your property. The tax rate is set by your municipality and the value is calculated by Municipal Property Assessment Corporation in Ontario. The value is based on the purchase price as well as the market conditions in your area.


Finally, you now own the home so you are responsible for maintenance and any unexpected costs that arise. This may include replacing a deck or hot water heater. You may want to upgrade your home appliances or build an addition in the long term. Maybe your roof shingles or deck boards have seen better days. The costs go on and on, and you are responsible for maintaining your property or you could be liable if anyone is injured due to your negligence.


The focus is not to be overwhelmed by the cost. Good habits and preparation for what to expect.

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