Understanding the Costs of Home Ownership
Are you thinking of buying a home? Buying or refinancing a home involves many financial considerations.
Here’s a list of some common costs/fees you should be aware of:
Proof of Down Payment / Closing Costs
Banks want to see 1 – 1.5% of the mortgage amount in your account after the down payment to ensure you have enough to cover closing costs (i.e. lawyer, inspection, appraisal, property tax adjustments).
Lawyer (Solicitor) Fees – aka “Closing Costs”
Even a straightforward purchase or refinance may require the services of a lawyer (we recommend you engage the services of a Real Estate Lawyer).
A lawyer can review the Offer to Purchase, search the property’s title, draw up the final mortgage documents, register the mortgage (with the land titles office) and tend to the closing details (exchange/distribution of the mortgage funds). Lawyer’s fees for a mortgage range widely and will depend on the complexity and type of mortgage (ie purchase vs refinance).
Title Insurance and/or Real Property Report (RPR)
Title Insurance protects the insured (in this case the lender) against loss resulting from title and survey defects that would otherwise have been revealed by an up-to-date survey or RPR (Real Property Report).
Title Insurance also protects the insured against losses associated with fraud and forgery as it relates to the title of your property. Title insurance can vary but typically ranges from $200-350.
Tip: Ask your lawyer about being added to the Title Insurance Policy at the time of closing; while you can also be added after closing you may incur additional cost to do so.
In some cases, your lender may require an up-to-date Real Property Report (RPR). Ask your Realtor to have the vendor (seller) to provide this as a condition in your Offer to Purchase, otherwise you will have to pay to have one done. The cost of a new survey usually starts at $500.
In today’s ever-changing housing market, using a Realtor can be extremely helpful, as they have the ability to search thousands of potential listings, and can save you time and money by pin-pointing desirable properties. Fees are standardized and are paid by the seller of a property. If you are selling your property you should expect to pay 7% on the first $100,000 and 3.5% on the remaining balance of a sold property. When buying you will not pay your realtor; their portion of commission is paid by the seller.
A home inspection differs from an appraisal. A home inspection analyzes the structural integrity of a home (foundation, electrical, heating etc.) rather than determining the current market value.
Inspectors are unregulated in many provinces (ask for a referral/do your homework), and fees can range widely. You can expect an approximate cost of $250 – $450 for a home priced under $400,000. Larger, more expensive homes can come with a larger fee.
You know what they say: there are only two certainties in life: death and taxes. Property Taxes are always a certainty. If you have an insured mortgage (less than 20% down payment), some lenders may require you to have your property tax paid monthly by way of instalments along with your mortgage payment. In some cases, your mortgage broker can request your payments be paid by you, this must be done directly to the municipality through a monthly installments payment plan (TIPP).
A good estimate of the annual property taxes due is roughly 1% of the total value of your home.
Be sure to budget for heating, electricity, and water. You can contact the local providers for pricing. Deposits may need to be paid on all new accounts being opened.
Buying your first home is one of the biggest financial investments you will make, and understanding the costs associated with owning a home can be helpful foresight for your financial planning.
Do you have more questions? Our mortgage specialists are happy to answer them.