It is important to be aware of any and all additional costs that come with buying your first home, in addition to your initial down payment. Below, we go over some of the hidden or unexpected costs you may not be aware of.

Home Inspection

Getting a home inspection may not mandatory but is highly recommended as it could save you thousands down the road in repairs. Pricing for a home inspection varies based on your property, but hiring a professional home inspector will give you an accurate report about all aspects of the property. A home inspection will give you a professional assessment of items that need to be taken care of to maintain the property. When purchasing a new home, you can make your offer conditional upon a home inspection. This window of time also allows you to cancel your agreement should you not be satisfied with the outcome of the inspection.

Making a Deposit

It is important to know that making a deposit on your home is not the same as a down payment. In Ontario, the deposit is typically 5% of the purchase price, and you are often expected to make a deposit within 24 hours via certified funds (a bank draft, money order, etc). It is important to have this money set aside and easily accessible as the funds are due 24 hours after the acceptance of an agreement. When the sale goes through, the deposit is credited in full and put towards the purchase price of your home.

 Appraisal Fee

When you purchase a property, the lender you will be getting your mortgage from will often conduct an appraisal on the property you just purchased. Most appraisals cost around $350-$500 and your lender will arrange to have this done. The cost of this will likely be passed on to you. Getting an appraisal is necessary when purchasing a new home because the bank will not lend money on a property otherwise. They want to ensure that they are in line with the value of the property.

For more information on how the appraisal process works refer to this article

Property Survey

Property surveys are used to confirm already established boundaries as well as establish boundaries if new parcels of land are being developed. A property survey will help you to determine where your property ends and where your neighbours begins which is imperative if, for example, you are looking to build a new house. The cost of a property survey will differ depending on the property’s complexity, features and record history. Although you may not need a property survey, it is important to prepare yourself for the additional costs in case it is required. It is also common that a seller may have their own property survey from a previous sale, and you may be able to ask for a copy as a condition in the deal. It will save you the headache of trying to figure out the precise boundary lines and disputes with neighbours down the road.

Legal Fees

When you are purchasing a home, you will need to hire a Real Estate Lawyer to protect your rights and guide the transaction from start to finish. Additionally, your lawyer will tackle many other jobs such as conducting a title search, getting title insurance in place, registering the home in your name, drawing up a Statement of Adjustments, and facilitating the financial transactions on closing day. You will want to call a Real Estate Lawyer as soon as you’re ready to sign an Offer of Purchase. There is no set fee for legal services but expect to pay around $1,500-$2,000. You will want to make sure the lawyer on your side of the transaction is knowledgeable and experienced, and specializes in real estate.

Land Transfer Tax

Home buyers in Ontario will have to pay land transfer taxes when they purchase a property – home or condo. Your lawyer will arrange for these taxes to be paid on closing day when your new property is transferred into your name. Buyers in Toronto will also have to pay Toronto Land Transfer Tax on top of the Ontario Land Transfer Tax. For first-time home buyers, you may be eligible to receive a refund for land transfer tax through a program called the “Land Transfer Tax Refund Program”. Refer to this article to see the procedures and requirements to qualify for this program. Click here to calculate and learn more about your land transfer taxes.

Mortgage Default Insurance

In Ontario, homebuyers with less than 20% down payment are required to purchase CMCH (Canada Mortgage and Housing Corporation) insurance, or mortgage default insurance. Lenders can offer lower mortgage rates for higher risk mortgages and mortgages with lower down payments. Refer to this article for our mortgage calculator. According to CMCH’s website, to get mortgage loan insurance, you will need a minimum down payment. The amount depends on the home’s purchase price:

  • If the home costs $500,000 or less, you will need a minimum down payment of 5%.
  • If the home costs more than $500,000, you will need a minimum of 5% down on the first $500,000 and 10% on the remainder.
  • If the home costs $1,000,000 or more, mortgage loan insurance is not available.

There have been changes to the insurance criteria effective July 1, 2020 so make sure you are aware of what you are eligible for so you can get an estimate on how much you will need to save. Refer to this article for more information on CMCH’s new criteria and how it affects first time home buyers in Toronto.

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Home Insurance

It is highly unlikely that a lender will offer you a mortgage without proof of home insurance. Home insurance covers any damages related to your home. This refers to unforeseen events such as water or fire damage, windstorms or theft. The lender wants to make sure that the home will be repaired or replaced if damage occurs. The price of home insurance varies based on personal details, home features, and the amount of coverage.

Utilities and Property Taxes

Utility and property taxes are important to consider when purchasing your home. These adjustments include water, hydro and property taxes, and ensure both the buyer and seller only pay for the utilities and taxes for the period they owned the property. To understand your utility bill further and tips on how to reduce costs, refer to this article.

Moving costs

Moving costs can vary based on the services you need such as renting a moving truck or hiring a moving company. There is a huge cost difference depending on which moving company you decide to book, so doing your research can save you time and money. You can cut costs by starting your packing early, getting boxes from work or grocery stores, and getting friends to help with your move. Although it can be done for relatively cheap, you will still need to consider setting aside some costs for the process leading up to and the day of the move.

The process of buying your first home is not an easy one. If you are financially prepared and budget based on the categories listed above, it can definitely take weight off of your shoulders so that the process is smooth and there are no hidden costs. Book a call with us today to begin the journey of purchasing your first home.