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Home Purchasing Costs
Costs of Purchasing a Home
Buying a home costs more than the offer you make. 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. Please note that they can vary by province and are subject to change.
- Purchase Price
- Lawyer's Fees
- Land Transfer Tax
- Registration Fees
- High Ratio 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
- Connection Charges
- Property Tax and Prepaid Utilities Adjustments
- Interest Adjustment (IA)
Purchase Price
The starting point in your calculation... if you're like most
Lawyer's Fees
Although fees vary across the nation, it can cost you up to $2,500
depending upon whether you are re-mortgaging your existing home or
buying new.
Land Transfer Tax
A tax payable to the Provincial Government by the purchaser upon the
transfer of title from a seller. This amount is usually not expected by
most homeowners. It can be sizeable. The amount varies from province to
province and is generally a percentage of your purchase price.
Registration Fees
Fees 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.
High Ratio Insurance
Must be purchased if you are buying a home for less than 25% down. A
sliding fee scale applies, depending on the percentage of the purchase
price required in a first mortgage (some minor exceptions). For example,
as of May 1997 Canada Mortgage and Housing Corporation (CMHC)
and its competitor
GE Capital charge a 2.5% one-time fee — which can be added to the
mortgage — for any mortgage over 85% — 90% of the purchase price. See
also
Mortgage Insurance for a definition.
Compliance Letter
Obtained by your lawyer and required in many municipalities throughout
Canada before a property transfer can take place. This is an
acknowledgment 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.
Tax Certificate
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 75% 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 $150 — $235
each would apply.
Home Inspection
A report commissioned by a property owner or purchaser, usually to
verify the condition of a property prior to the "firming up" of a
purchase agreement. 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. The best safeguard against inadequate work is to ask for
the resume of the Inspector, or select a name firm, such as Carson
Dunlop, who stand by their work.
Land Survey
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.
Title Insurance
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.
Connection Charges
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 June 15th, pay 15 days interest on closing and start
payments on August 1st.
