When house-hunting people make sure to only look at homes within their budget, lest they fall in love with a house they can’t afford. But the sale price is only one cost involved in purchasing a home, albeit the most important cost. When buying a house, there are a number of other one-time fees and costs involved that you may not be aware of. It is best to be aware of these costs upfront as they can impact the type of mortgage you qualify for, as well as the size of your down payment, and even your offer. In this blog post, we break down the true cost of purchasing a home by explaining some of the fees you may be expected to pay:
Home Inspection
While a home inspection is optional, it is advisable that you have one conducted. A certified home inspector will ensure that everything in the home is in good working order, and will tell you if anything needs to be fixed or replaced. A home inspection is conducted before you commit to purchasing the home, and ensures that you are making the best-informed decision about whether to buy the property or not. After the inspection, you still have the option to walk away if you want to.
Land Survey
Some mortgage lenders will want to see a land survey, which sets out the boundaries of the property and identifies any issues that could impact the property’s value. Depending on when the last land survey was conducted, you may need to have a new one done. A land survey can cost between $1000 – $2000.
Title Insurance
Title insurance protects you against title fraud, municipal work orders, zoning violations, errors in the public registry and other property defects. Your lawyer may advise you to secure title insurance, and some mortgage lenders will require it as part of your mortgage application. It depends on the type and size of your property, but title insurance often costs between $300 – $400.
Home Insurance
Home insurance, also known as property insurance, protects you in case of damage to your home. Home insurance should cover your property’s replacement value and must be in effect by closing day for your lender to release the funds.
Land Transfer Tax:
Depending on the province, the land transfer tax can cost anywhere from 0.5% – 2% of the property value. Any person buying property in Ontario has to pay a land transfer tax. First-time home buyers, however, are eligible to receive a rebate on a portion of the amount up to $4,000. You cannot have owned property anywhere in the world previously to qualify.
Mortgage Default Insurance
If your down payment is less than 20% of the purchase price of the property, then you must get mortgage default insurance. This insurance protects the lender in the case that you can no longer make your mortgage payments. The amount is usually added into your monthly mortgage payments or can be paid in full upon closing.
Legal Fees
Real estate lawyers manage all of the legal paperwork involved when acquiring a mortgage, including conducting a title search, drafting the title deed, and preparing the mortgage. Your lawyer’s legal fees will need to be paid upon closing and costs will vary depending on the province. These fees usually include GST or HST, where applicable.
The total cost of all these fees depends on the area in which you live as well as the type of home you are buying. However, you can usually expect to pay anywhere between 3-4% of the purchase price of the property. By knowing about these fees upfront, you can factor them into your budget to be fully prepared for when you take the plunge into homeownership.
Do you have any further questions about these fees and when you might be expected to pay them? Contact your Royal LePage Performance Realty RealtorⓇ today for more information!
