Additional Costs When Buying a Home
- The purchase price of your home is only one of the costs you’ll encounter. Here are other possible costs you need to consider (not all will apply in every purchase, and these are all estimates)
- Some experts recommend saving 3% – 4% of your home’s purchase price to put toward closing costs
- In Canada, you must put down a minimum of
- 5% as a down payment for homes less than $500,000
- 5% as above + 10% on the amount between $500,000 and $999,999
- 20% for houses over $1 million
Mortgage Loan Insurance (CMHC): (0.6% – 4%)
- Mortgage default insurance (calculator), also known as CMHC Insurance. If you have a down payment of less than 20% of the home’s value, you must purchase mortgage default insurance. But this doesn’t act as insurance for you. Rather, it protects your lender in case you don’t make your mortgage payments. It’s designed to make financial institutions comfortable with lending to individuals who don’t have a large down payment.
- Mortgage insurance is calculated as a percentage of the value of the mortgage amount. If your down payment is between 5% to 9.99%, the mortgage insurance will represent 3.6% of the mortgage amount. For down payments of 10% to 14.99%, the mortgage insurance will cost 2.40%. And for down payments of 15% to 19.99%, mortgage insurance costs 1.80%.
- CMHC insurance isn’t available for homes with a purchase price of more than $1 million. As a result, anyone buying a house in excess of this amount must have at least 20% as a down payment on their purchase.
Appraisal fee: ($450+/-)
- Lenders typically loan a percentage of the home’s purchase price or the market appraisal of the property. Cost depends on the size and complexity of the assignment.
Land survey ($350 – $600):
- Non Common. The lender may ask for a current survey or certificate of location before signing off on the loan. There can be a substantial cost for having a new survey done on the property.
Deposit: ($25k – $75k)
- A deposit normally goes with the formal offer to purchase.
Property Insurance: ( $1250/annual)
- The lender will require proof of property insurance for the replacement value of the house and its contents from the day you take ownership. Average house: $1250, average condo: $700-1000.
Title insurance: ($350+/-)
- Provides coverage in case of problems with the property title, among other things. The cost is relatively low, usually a few hundred dollars.
- Some lenders will pass on the cost to process your application. These fees vary and some lenders will waive them entirely if you have other accounts with them.
Mortgage broker’s fee:
- If you use a mortgage broker, a fee may be charged to arrange a mortgage on your behalf.
Home inspection fee: ($400+/-)
- An inspection protects the buyer by revealing any problems in the property that you’d want to know before you move in.
Legal fees: ($1000+/-)
- You can save some of the legal fees usually charged by the lender if your lawyer draws up the mortgage. You’ll also pay for disbursements which are the costs involved in drawing up the title deed, conducting a title search, and preparing and registering the mortgage.
- Use the land tax calculator accessible from the home page of this website to calculate both your Ontario and City of Toronto (if applicable) land transfer taxes. First-time home buyers qualify for a maximum $4,000 provincial rebate and a maximum $4,475 City of Toronto rebate.
Harmonized Sales Tax (13%): (New Build Only)
- Resale (used) homes are exempt from HST but it does apply to newly constructed homes and you may qualify for a partial rebate depending on the sale price and if the home is going to be your primary place of residence.
Other costs: These include:
- Moving costs,
- Fees charged by utilities for service hook-ups,
- Property tax and other adjustments (an adjustment takes place when the seller has already paid for something in advance and wants to be credited for the unused portion on the date the house becomes yours i.e. property tax), and
- Ongoing maintenance (condo fees, etc.), and
- Utility costs