Upfront costs of buying a home
You've found the house of your dreams. You've signed
on the first of many dotted lines. You've come to terms with the
notion of a mortgage, which will loom over your head like an ominous
rain cloud (figuratively speaking).
But before you take possession of your new abode,
you need to consider the closing costs. Generally estimated at between
1.5 percent and 4 percent of the total price tag of the home, these
are the unavoidable disbursements that are the last hurdle between
you and glorious home ownership.
Due upon the acceptance of your purchase offer, a deposit is essentially
a gesture of good faith between the buyer and the seller. A minimum
deposit is usually $10,000.
Mortgage loan insurance
This is a mandatory expense for buyers who make a down payment of
less than 25 percent. Administered through either the Canada Mortgage
and Housing Corporation (CMHC) or GE Capital Mortgage Insurance
Company, this insurance accounts for between 0.5 percent and 3.25
percent of the mortgage loan. (And don't forget to factor in provincial
Real estate agents counsel buyers to make an offer on a home conditional
on the outcome of an independent home inspection. A home inspector
looks for items that could affect the price and desirability of
a home, such as outdated wiring, shabby roofing, an elderly furnace
or cracks in the foundation. The fee depends on the home's size,
age and the amount of time it takes to do a thorough inspection.
For residences that are more than 25 years old, Carson Dunlop --
one of the most widely used companies -- charges $405 for homes
under 2,500 square feet, and $995 for ones that are more than 5,000
Canadian law states that a home owner must have fire insurance on
his new property effective when he takes possession. If the home
inspection turned up antiquated wiring or other problematic features,
a potential insurer may refuse to cover you unless you get it fixed.
Rule of thumb: Factor in all costs required to pacify the insurance
A lawyer is vital to any home deal. She's responsible for research,
handling documents, mediating with the seller's attorney and trundling
down to the Land Transfer Office to pick up your new keys.
Land transfer tax
Some provinces impose a one-time fee when you buy a home. Varying
in rate from province to province, the levy is based on a percentage
of what you paid for the property. In Ontario, for example, the
rate is 0.5 percent on the first $55,000 of the price, 1 percent
on the next $195,000, 1.5 percent on the next $150,000 and 2 percent
on the balance.
This protects you from any unpleasant revelations about your property's
history that might crop up in the future. Unless you pay for a survey,
it's difficult to ascertain a comprehensive history of your property.
In order to deal with potential errors or omissions in the public
registry or secret heirs to the land, most new homeowners buy title
insurance. For a typical residence in downtown Toronto, for example,
the cost for this insurance is $270. The fee depends on two factors.
The first is whether the property is urban or rural; title insurance
costs more out in the country because there's a greater chance that
the property may contain an undisclosed structure, such as a well
or a septic tank. The second factor depends on whether it's a single
residence or a multiple-family dwelling (such as an apartment);
the cost is more in the latter case.
Unless you take possession on the first of the month, you must prepay
the amount of interest accrued up to the first day of the next month.
That sum is due on closing day.
The seller may be entitled to a reimbursement, from you, if she
has prepaid bills (water, gas or hydro) or property taxes.
Whether you're hiring professional haulers or conscripting friends
and family to lug boxes, you can expect an outlay of cash on moving
Service activation fees
Once you move into your new dwelling, you'll inevitably have to
pay activation fees for utilities such as phone, cable, gas and
Forwarding your mail
You've made a point of apprising the important people in your life
-- family, friends, employers, the bank, the utilities, your credit
card company -- of your new address. But you're bound to forget
someone. To ensure you don't miss any crucial mail, you should get
Canada Post to forward mail sent to your old address to your new
residence. You can sign up for the service online or at any post
office. The cost is about $30 for six months, but peace of mind
Andre Mayer is a freelance journalist
based in Toronto, Ontario.