When searching for your dream home, it’s important to remember there are more costs involved with purchasing a house besides just the mortgage. In an earlier blog post, we discussed some of the additional costs of buying a home that can arise before the sale is even completed, such as a home inspection. But once the deal is done, there are additional financial responsibilities that buyers should prepare for.
Most buyers are aware that there are some closing costs that they will need to pay, but it’s important to always keep an open conversation with your lawyer, lender, and Realtor® in advance of the closing date so you know what to expect. The Real Estate Council of Ontario’s fall edition of Connect Magazine has offered some examples of these closing costs, so buyers will know what questions they should be asking.
When your home closes, you may be responsible to cover the costs of adjustments, which are costs that the seller has prepaid (often for the year) and that now you must repay since you are taking over ownership of the home. Costs will vary, but typically can include annual taxes, maintenance fees, or hot water rental fees. Your lawyer will provide you with a statement of adjustments on the property to notify you of the full amount owing.
In addition to title insurance, you may be required to obtain both mortgage insurance and home insurance, depending on your type of mortgage and your lender. Most lenders will require home insurance prior to releasing the funds for the sale to close. If your down payment is less than 20% of the purchase price of your home, you will also be required to pay mortgage insurance. Make sure that you speak with your lender and that you fully understand your financial requirements prior to closing on your new home.
One of the costs to be aware of is the land transfer tax. This is a provincial tax in Ontario of up to 2% of the purchase price of the home. In Toronto, buyers can expect to pay an additional municipal land transfer tax, also up to 2%. When buying a home, make sure to ask your Realtor® about which land transfer taxes apply for your region. First-time homebuyers should also ask about their eligibility for a refund on this tax.
If you are buying a new home, you may be required to purchase Tarion new home warranty protection to cover any damages, defects, deposit complications, or other issues. In some cases the warranty is included in the purchase price of the home, and other times it isn’t. It’s important to be aware of this cost before your closing date. Additionally, you are responsible for 13% HST when you are buying a newly constructed home (as opposed to a resale home), although you may also be eligible for rebates on this tax from the provincial or federal government.
If you have any questions about closing costs or additional financial obligations when purchasing a home, please feel free to contact us directly or search our website for a sales representative who can help you. If you’d like to receive regular updates from the Performance Realty blog, sign up to have our entries sent directly to your e-mail inbox!
