When buying a home, there are several hidden costs that go beyond the sale price of the property. Here are some of the common hidden costs to consider:
Land Transfer Tax
Ontario imposes a land transfer tax on the purchase of a property. The amount is calculated based on the purchase price, and it can be substantial. First-time homebuyers may be eligible for a rebate, but it’s still a significant cost for most buyers. For example, the tax is 1% on the first $55,000 of the purchase price, 1.5% on the portion from $55,000 to $250,000, and 2% on anything above that. If purchasing in Toronto, there is also a Municipal Land Transfer Tax (MLTT).
Legal Fees
Hiring a lawyer to handle the closing process is important. Legal fees can range from $800 to $2,000+, depending on the complexity of the transaction. This cost also includes any title searches, preparation of documents, and registering the sale with the land registry. Be sure to reach out to a few real estate law firms for quotes to have an idea of what to expect with your transaction.
Home Inspection (if applicable)
A home inspection is typically recommended to ensure the property is in good condition. Depending on the size of the home and the inspector’s fees, this can cost between $300 to $600 or more. A more specialized inspection (like for mold or asbestos) could add more to the cost.
Property Insurance
Mortgage lenders require home insurance before you can close on the property. The cost will depend on the home’s value, the deductible, and the level of coverage, but it’s generally around $500 to $1,500 annually.
CMHC Insurance (if applicable)
If you are putting less than 20% down as a down payment, you’ll be required to pay for Canada Mortgage and Housing Corporation (CMHC) insurance, which protects the lender in case you default on the mortgage. The cost of this insurance is added to your mortgage and varies depending on your down payment size.
Mortgage Application and Appraisal Fees
Some lenders charge application fees, which can range from $200 to $400. Additionally, an appraisal may be required by the lender to determine the value of the property, and this can cost around $300 to $500. Check with your lender if these costs are covered or they can waive them.
Utility Hookup Fees
When you move into your new home, you will need to set up utilities like water, gas, hydro, and internet. Some utility companies charge fees to set up new accounts or to install services, which can cost between $100 to $300, depending on the service provider. Check with the utility provider if they will be charging hookup fees.
Closing Costs
These include various fees that are incurred during the closing process, such as title insurance, registration fees, and other administrative fees. They can add up to 1.5% to 4% of the purchase price of the home.
Property Taxes
Property taxes are typically due annually, but buyers may need to pay a prorated amount at closing, depending on the time of year. Your lawyer will inform you if that is required. Property taxes vary significantly depending on the municipality, and they should be factored into your long-term homeownership budget.
Moving Costs
Whether you’re hiring a moving company or renting a truck, moving into your new home comes with its own set of costs. Hiring professional movers can cost anywhere from $500 to $2,000 or more, depending on the size of the home and the distance.
Renovations and Repairs
Even if the home is in good condition, you may want to make some improvements or repairs. Budgeting for these changes should be part of your overall home-buying plan. Renovation costs can vary widely, from minor cosmetic updates to larger structural repairs.
POTL or Condo Fees
If you’re buying a condo or a property within a monthly road fee, there may be additional monthly fees to cover maintenance of common areas, amenities, or services. These can range from less than $100 to over $1,000 per month, depending on the property.
These hidden costs can add up quickly, so it’s important to budget for them when planning your home purchase. By considering all of these additional costs, you’ll have a more accurate picture of the true cost of owning a home in the province.
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