There are various financial considerations to be cognizant of before buying a home. Whether it is your first or fifth time purchasing a house, it is crucial to stay up-to-date on what to expect so that there are no surprises that leave you caught up in unforeseen fees. Here are six home purchase costs in Ontario that you’ll want to know about before you make an offer.
A down payment is the amount of money you initially put toward buying a house. If you get a mortgage, the lender will deduct this initial payment from the purchase price of your home. In Ontario and across Canada, the minimum down payment depends on the cost of the home you’re purchasing:
If the purchase price is $500,000 or less, then the minimum down payment is 5%.
If the purchase price is between$500,000 to $999,999, then the minimum down payment is 5% for the first $500,000 and 10% for the amount thereafter.
If the purchase price is $1 million and above, then the minimum down payment is 20%.
Saving for a down payment of at least 20%, regardless of the purchase cost, eliminates the need for mortgage insurance, and it will save you money on monthly interest payments. Also, it is worth noting that HST can be added to new construction developments but not always on resale homes.
Mortgage Loan Insurance
If your down payment is less than 20% of the purchase price, mortgage loan insurance protects lenders if you can’t make your monthly payments. Suppose you have a poor credit history or are self-employed, your lender may still require mortgage loan insurance even if you have a significant down payment. For homes over $1 million, mortgage default insurance is not available. The cost of this insurance depends on the purchase price and the amount you can put down on the home.
Land Transfer Tax
Tax rates for transferring property are progressive, meaning the more expensive your purchase price is, the more you will be taxed. In Ontario, land transfer tax uses the following framework:
$55,000 and less: 0.5%
Above $55,000, up to and including $250,000: 1.0%
Above $250,000, up to and including $400,000: 1.5%
Above $400,000: 2%
Keep in mind that you may have to pay both provincial and municipal tax rates. While Ottawa has no specific land transfer tax, Toronto, for example, has a Municipal Land Transfer Tax (MLTT), which follows a similar guideline until your purchase price reaches $2 million. Consult your local real estate agent to help determine your land transfer tax amount.
A real estate lawyer takes care of the legal paperwork associated with your home purchase, such as title searches, title insurance, and transferring the home into your name. The cost of an attorney depends on the complexity of the transactions but can range anywhere from $500 to $1,500.
An appraisal may be required when you get a mortgage to determine the lending value of your home. Lenders want to ensure the house is worth the purchase price. If the assessment does not justify the loan amount, they may risk financial loss in the event of mortgage default. Appraisals can range between $300 and $500.
Professional inspections can identify life-threatening issues and save you thousands of dollars before you purchase if there are critical problems. It can also prepare you for minor issues that may need work before you move in. Home inspections can cost between $300 and $600.
Other Costs to Consider
Keep in mind other fees associated with purchasing a home, including the monthly payments on your mortgage and the price of moving, utilities, furniture, maintenance, and renovations. It’s essential to understand all of the potential home purchase costs in Ontario so that you can be financially prepared and ready to move when you find the right place.Whether you’re a seasoned or first-time home buyer, you can count on our experienced realty team to help you navigate the purchasing process in the Ottawa area. Contact us today to start searching for your next place to call home.