BUYING COSTS

DEPOSITS & DOWN PAYMENTS

As soon as your Offer to purchase has been accepted, your Realtor has 24 hours to deliver the deposit cheque to the listing brokerage. Occasionally, it may be beneficial to submit your deposit along with the Offer. This is a negotiation tactic that may bolster your offer in a multiple offer situation.  In Toronto, deposits are generally 5% of the purchase price and in other markets it may only be 2%  so ensure you are prepared to have this amount ready before you make an offer on a property.

 

You should also be prepared to have your financing in order and your down payment ready before you offer on a property.  Down payments should be at least 5% - 20% of the purchase price.  Any deposit under 20% will need to be insured under CMHC - The Canadian Mortgage and Housing Corporation - which will add an extra charge to your mortgage payments.

HOME INSPECTION

Before finalizing the purchase of your new home, it is important to have the house thoroughly checked by a reputable Home Inspector.  A professional home inspection will reduce your risk and identify any current or potential problems.  Costs can average from $400 to $600 depending on the extent of the inspection and the size of the property.  If you are purchasing a country property, you may also require additional inspections for the well and the septic systems.

 

The primary purpose of a home inspection is to determine if the home has any existing major defects or will require any major repairs in the near future.  Ensure that you hire a Registered Home Inspector (RHI) from the Ontario Association of Home Inspectors (OAHI).  Members of the OAHI must follow a strict Codes of Ethics and Standards of Practice.

 

An inspection done to the Standards of Practice of the Ontario Association of Home Inspectors (OAHI) will cover the following major systems and components: Roofing, Chimneys and Flashing, Exterior, Property Drainage, Structure, Electrical, Heating and Cooling, Insulation, Plumbing, Foundation and Interior.  A typical Home Inspection takes approximately three hours.  You should always attend the home inspection and ensure the inspector provides you with a written report.

 

If significant defects are discovered during a home inspection, you should consider your options carefully.  You can:    

1) Proceed with the purchase   

2) Opt out of the agreement

3) Request the Seller remedy the problem

4) Request a price reduction so that you can remedy the problem yourself.

LAND TRANSFER TAX

Land Transfer Tax must be paid by anyone who purchases land in Ontario.  Toronto residents are required to pay an additional municipal land transfer tax. Boundaries for Toronto LTT are from: Lake Ontario to Steeles Avenue and Scarborough to Etobicoke.  

 

The tax is paid on the closing date of the purchase and is based on the amount the buyer pays for the property.  

As of January 1, 2017, Ontario doubled the Land Transfer Tax Rebate for first time home buyers to $4,000.   For first time home buyers in Toronto, there is also a maximum $3,725 rebate on the municipal Land Transfer Tax.

In order to qualify fo the Land Transfer Tax rebate:

  • You must be at least 18 years old

  • Your spouse cannot have owned a home while being your spouse

  • You must occupy the home within nine months of purchase

  • If the home is newly constructed, it must be eligible for home warranty

  • You must apply for the refund within 18 months of purchase

 

For more information on who qualifies for the LTT rebate, please visit: OREA

LAND TRANSFER TAX RATES FOR ONTARIO & TORONTO

   The following rates apply for a single family residence in Ontario:    

    0.5%    $0 up to and including $55,000

    1.0%     Amounts exceeding $55,000 up to and including $250,000

    1.5%     Amounts exceeding $250,000 up to and including $400,000

    2.0%    Amounts exceeding $400,000

   The rates below apply to the Toronto municipal LTT:

    0.5%    $0 up to and including $55,000

    1.0%    Amounts exceeding $55,000 up to and including $250,000

    1.5%    Amounts exceeding $250,000 up to and including $400,000

    2.0%    Amounts exceeding $400,000 up. to and including $2,000,000

    2.5%    Amounts exceeding $2,000,000, where land contains 1 or 2 single family homes   

CALCULATE YOUR ONTARIO LAND TRANSFER TAX:   LTT Ontario

CALCULATE YOUR TORONTO LAND TRANSFER TAX:  LTT Toronto

LEGAL COSTS

A number of legal expenses accompany the purchase of a home and can total, on average, $1,000.00 - $2,000.00 plus any applicable closing adjustments such as prepaid property taxes and heating oil.  The largest costs are associated with the Title Search and Title Insurance.  Please be aware that more complicated transactions can result in substantially higher legal costs.

     

Other costs include:    

  • Reviewing the terms of the offer

  • Registration of a Deed

  • Registration of a Mortgage

  • Execution Searches

  • Registry Search

  • Reviewing the statement of adjustments for taxes, utility bills and other costs that have been pre-paid by the seller at the date of closing

  • Reviewing the Status Certificate for a condominium

WHAT IS TITLE INSURANCE?

Title is the legal term for the ownership of property.  Prior to closing, your lawyer will conduct a search of public records to determine the previous ownership of the subject property.  The search will reveal such things as: existing mortgages, registered liens for outstanding taxes or utility charges, and easements.  All mortgages and liens will be cleared up before closing, however, some problems or defects are not discovered during the title search and, without title insurance, the buyer would have to pay for these discrepancies out of pocket.  Title Insurance is paid only once and will remain in effect and protect the homeowner as long as he or she holds title to the property.  Title insurance protects against such problems as: survey irregularities, forced removal of existing structures, claims due to fraud, forgery, unregistered easements and rights of way, zoning and set back non-compliance or deficiencies.  Expect to pay between $400-$1,000.

HARMONIZED SALES TAX 

When you purchase a newly constructed home or condominium, the entire purchase price is taxable.  If the property is purchased by an investor and is to be rented, the full 13% HST will be charged on the purchase price.  However, if the home will be your primary place of residence, you qualify to receive the HST New Housing Rebate (to be assigned to the builder).  Because of this assumption, the Builder will require you to assign back to the builder your entitlement to receive the HST New Housing Rebate from the government and, therefore, does not need to charge you to pay this amount in addition to your sale price. The assignment of this HST rebate typically occurs at Final Closing.

HST is also payable on on other home-buying costs, such as: Commissions, Legal Fees, Home Inspections, Insurance, Moving Costs, etc.  The purchase of Vacant Land can be subject to HST.

MORTGAGES

A mortgage is a loan generally used to buy a property.  How much you pay depends on how much you borrow (the principal), the loan’s interest rate, and how long you take to pay it back (the amortization period).

 

Finding the right mortgage is an important consideration in the buying process.  Before you begin your home search, it is important to establish how much you can afford to spend with a mortgage “Pre-Approval”.  It is pointless to look at homes that are not within your price range as it will only make the home search process frustrating and disappointing.   Pre-Approved buyers have increased bargaining power and credibility with the seller as they are perceived as serious buyers which can be particularly beneficial in a multiple offer situation.  And be sure to visit at least two lenders before you make a decision.

OTHER POTENTIAL COSTS

  • Many homeowners have a survey, however, if one does not exist, Title Insurance may satisfy the lender.  However, in some cases your lender may request survey.  Should you need to order an up-to-date survey,  expect to pay, on average, $1,000-$2,500

  • If you are purchasing a condo, you may have to pay up to $100 for a copy of the Status Certificate.

  • Interest adjustments between date of closing and first mortgage payment

  • Service charges from utility companies for hook-ups on electricity, gas, telephone, cable, and internet

  • Appraisal fees

  • Moving costs

  • Home insurance

  • Storage costs if you must leave your current residence before the closing date of your new home.

  • Real estate commission - While commissions are typically paid by the seller some circumstances exist whereupon the buyer may have to pay a portion of or the entire commission. 

  • If the purchaser is not a citizen or permanent resident of Canada, they will have to pay a $15,000 Non-Resident Speculation Tax for purchases in the Toronto area.  For more information, click here: NRST

AS A GENERAL RULE OF THUMB, YOU SHOULD BUDGET AT LEAST 2-4%

OF THE PURCHASE PRICE FOR ADDITIONAL BUYING COSTS. 

GOVERNMENT PROGRAMS FOR HOME BUYERS

FIRST-TIME HOME BUYER

INCENTIVE

This is a shared-equity mortgage that allows you to borrow 5-10% of the purchase price of a home to help reduce your monthly mortgage payments.  You must pay back the same percentage of the loan when you sell the house or after 25 years -whichever is sooner.

For more information on this program,  visit: placetocallhome

CMHC GREEN HOME

PROGRAM

When you use CMHC-insured financing to buy or build an energy efficient home or make energy saving renovations, you may qualify for a premium refund of 10% on your mortgage default insurance and a premium refund for a longer amortization period (if applicable). 

 

For more information visit the CMHC website: www.cmhc.ca

HOME BUYERS' PLAN

The Government of Canada’s Home Buyers Plan allows qualified homebuyers to withdraw up to $20,000 from their RRSPs to purchase or build a house. 

 

If your spouse is also eligible, he or she may also be able to withdraw $20,000 for a total of $40,000.

For more information, visit: HBP

        For the most up-to-date information on government programs visit Service Canada’s website:

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