When you are purchasing your first home it’s important to know the costs involved so you can plan accordingly. Talking to a mortgage broker is a great first step to figuring out a buying range. Here are some of the costs that you will incur once you decide to buy a home.
1. Professional Agent Fees
a. Great news! As a buyer, the professional fees for your agent are paid by the seller so you do not have to pay a fee to have a buyer agent working for you.
2. The Deposit
a. The deposit is an amount of money that you submit with your offer and is applied to your down payment on the day you take possession of the home. For first time buyers who are not competing on a purchase, usually this amount will range from $10,000 to $15,000. You will need to have this amount available in the form of a certified cheque 24 hours after an agreement has been accepted. This means if you are putting in an offer you should be ready to move around funds right away.
b. First time buyers can use up to $20,000 from their RRSPs to put towards the purchase of a home- sometimes this money can be used as a deposit for a home depending on if your bank allows you to unlock them beforehand (this may vary from bank to bank).
3. Home Inspection
a. If you choose to do a home inspection (we always suggest that you do), the cost can vary depending on the size of the home. This can range anywhere from $100 (for a condo) to $500 (for a larger house) depending on the inspector you use.
4. Lawyer Fees
a. Lawyer fees also vary- but you can expect these costs to range from $800 to $1200. These fees are paid on the closing day (the day you move in) to your lawyer.
5. Title Insurance
a. You will also have to pay for title insurance on your closing day this is a standard fee of $430.00 for any purchase under $450,000. You lawyer takes care of this for you.
a. Disbursements is when the lawyer performs a title search on a home to ensure that the seller is indeed the owner of the home and is in good standing with their mortgage etc. This usually costs anywhere from $75.00 to $150.00.
a. These are when the lawyer makes adjustments to the purchase price based on the utility bills and property taxes that have been paid in advance or need to be paid still by the seller. For example, if the seller has paid the property taxes for the year in advance, then an adjustment would be made so the buyer would pay the excess amount the seller paid back to them on the closing day. Your lawyer will have an idea of what the adjustments are a few days before your closing day.
8. Land Transfer Tax
a. When you purchase a home in Ontario you have to pay a land transfer tax to transfer the ownership into your name. When you purchase in Toronto you have to pay two taxes- the provincial tax as well as a municipal tax. In cities outside of Toronto like Mississauga and Oakville, you only have to pay the Provincial tax. First time buyers are given a rebate when they purchase their first home and this can be automatically filed by your lawyer on the closing day and the money will come right back to you. The rebate is up to $2000 (you can get the rebate for both the Toronto tax and the provincial tax if you are purchasing in Toronto). Go to http://www.thamteam.com/Land-transfer-tax to use the land transfer tax calculator and see what kind of tax you’ll need to pay based on your purchase price.
Usually it is recommended by mortgage lenders buyers put aside an extra 1.5% of the purchase price for all of the items listed above, however this amount often does not take into account the rebate that you will receive for land transfer tax as a first time home buyer. This number may also be higher if you are purchasing in Toronto.
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