Now that you know what you can afford, the next step is to determine the additional costs of the home-buying process. According to CMHC and GE Capital, one should have, in addition to the downpayment, at least 1.5% of the purchase price for closing costs (we say 2-2.5% just to be on the safe side). The costs vary across provinces, and for that matter, cities. Below you will find a brief explanation of these costs, but a mortgage specialist at CGWSolutions, your realtor, or your lawyer or notary could provide you with a fairly close estimate.
Appraisal Fee:
The appraisal provides the lenders with a professional opinion of the market value of the property. The appraisal fee is normally the borrower’s responsibility and it can range from as low as $100 for a drive-by appraisal to as high as $200 for a full appraisal. The average cost is $175 plus G.S.T. Occasionally, the cost can be slightly higher for larger, custom-built homes, or homes in remote parts.
Home Inspection Fee:
The home inspection entails a professional inspection of the home, from top to bottom. Since it is undertaken for the benefit of the buyer, it is the buyer who absorbs the fee. A typical home inspection can cost anywhere from $250-$350, but our opinion is that they are well worth the investment. New home buyers may not worry about it, but it is a definite must for buyers purchasing properties older than 5 years. When hiring a home inspector, make sure the inspector has liability insurance just in case a mistake is made.
Fire Insurance:
All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.
Provincial Sales Tax of 8% (P.S.T.):
If your mortgage is CMHC or GE Capital insured (less than 25% downpayment), there is a P.S.T. of 8% in Ontario. While the insurance premium can be added to the mortgage amount, the P.S.T. must be paid at closing.
Land Survey Fee Or Title Insurance Fee:
A recent survey of the property is usually required by the lender, and if one is not available, it normally costs anywhere from $600-$900 for a new survey. In lieu of a survey, most lenders today will accept Title Insurance. Title Insurance can be obtained at a much lower price of approximately $225.
Legal Costs and Disbursements:
A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred such as registrations, searches, supplies, etc., plus G.S.T.
Land Transfer Tax:
Most provinces charge a land transfer tax which is payable by the purchaser and which varies according to the province. This tax is based on the purchase price (refer to mortgage ABC’s for exact calculation). In Ontario, first time home buyers who purchase a new home, receive a refund of up to $1725.
New Home Warranty:
In many provinces, new homes are covered by a new home warranty program. The cost to the purchaser for this warranty is approximately $600. Should the builder default or fail to build to an agreed-upon standard, the fund will finish or repair the deficiencies.
Mortgage Application and Processing Fee:
On a high-ratio insured mortgage (mortgages above 75% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for the application and processing of the file, as well as for the appraisal of the property. On new homes, this fee drops to $75.
Closing Adjustments:
An estimate should be made for closing adjustments for bills that the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the purchaser’s responsibility. Your lawyer/notary will let you know what they are exactly once the various searches have been completed.
G.S.T.:
On the purchase of a newly constructed home, GST is payable. Make sure you know who is responsible for this, you or the builder. Therefore, on the offer, the purchase price will say “Plus GST” or “GST Included”, and it will indicate who receives the GST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with the G.S.T. at closing. (As well, this tax is also charged on all professional fees).
Moving Expense:
You can rent a truck for around $75-100 per day and do it yourself, ask friends and family members for assistance, or hire professional movers. Note: Professional movers carry insurance for damaged goods which can cost several hundred dollars, depending on the amount of belongings being moved and the distance over which they are being moved.
Additional Costs:
These include utility hook-ups, repairs, painting, etc.