Did you know there were hidden costs to buying a home, or just suspect it. Sad to say there are, and if you are planning on buying a home in addition to your down payment you’re going to want to have some extra cash saved up.
Your down payment needs to be 5% minimum, but if you have less that 20% down your mortgage will need to be insured by either CMHC (Canada Mortgage and Housing Corporation) or GE (Genworth Financial Canada). This is different than mortgage insurance that you pay on your monthly payments, this is called Mortgage Loan Insurance and the cost carries depending on the size of your down payment.
Mortgage Loan Insurance:
The Good news is this extra cost will be rolled into your mortgage, so for example if you were borrowing $100,000 and the issuance cost was 1%, you would actually be borrowing $101,000
The premiums are as follows:
With a down payment of:
15.1% to 20% add 1.00 % to the mortgage
10.1% to 15% add 1.75 %
5.1% to 10% add 2.00 %
at 5% add 2.75%
Inspections: (Condo $450, Home $800, Rural $1,450)
Once you find that home of your dreams you’re going to want to be sure that it is, no one wants a money pit that keeps sucking their wallet dry. So you will arrange for a Home Inspection ($350-$550), and depending on the property type, Status Certificate for a Condo ($100), a well and septic inspection on rural properties ($500-$600) as well as possibly an appraisal fro the bank to verify the value of the home ($350-450 though you may be able to roll this into your mortgage as well).
Legal Disbursements: ( 2% to 3% of the cost of the home)
During the closing process you’ll pay your lawyer ($600-$1,000), and they will also organize (and sadly bill you for) several other closing arrangements, such as:
Land Survey or Title Insurance Your lawyer or the lender will specify whether a survey
is necessary or if title insurance will be acceptable in lieu of a survey.
Fire Insurance You will have to arrange and maintain fire and extended coverage insurance
for the outstanding balance of the mortgage or the replacement value of the building.
Ontario Land Transfer Tax
0.5% on the first $55,000 of the purchase price;
plus, 1% on the balance of the purchase price up to $250,000;
plus, 1.5% on any amount over $250,000 up to $400,000;
and then 2.0% on the balance of the purchase price over $400,000.
The land transfer tax is due on closing and reflected in the “Statement of Adjustments” which your
lawyer prepares prior to closing day.
Interest Adjustment Monthly mortgage payments are usually due on the first of the month.
Unless the closing date is the first of the month, you must prepay the amount of the interest
accruing up to the 1st day of the following month known as the “interest adjustment date”
(IAD). If however, you choose bi-weekly or weekly payments your interest adjustment period
may be much shorter.
CMHC or GE (High Ratio Insurance) & PST If your mortgage is insured by CMHC or GE
the insurance premium will usually be added to the mortgage so it is not a cash requirement
on closing. In Ontario the premium is subject to 8% PST, and this tax must be paid on closing.
Prepaid Expenses If the Vendor has prepaid any other expenses such as utilities, water and
sewage taxes, oil in tank or property taxes, they must be compensated. This will be reflected
in the Statement of Adjustments.
Property Tax Hold-back If the lender is collecting and paying property taxes you may
be required to pay to the lender an amount to ensure sufficient funds are available to pay
the next installment of property taxes when due. An alternative to a property tax holdback
is for the lender to increase the tax portion of the regular payment proportionately to ensure
sufficient funds are on hand in time to pay the taxes when due.
Other Fees Occasionally, a lender or the broker will charge a fee for providing the mortgage.
If so, these costs should be disclosed to you at the time the Statement of Mortgage (disclosure
statement) is issued to you.
GST Is payable on all new homes, commercial properties and land. GST is NOT payable
on un-renovated residential re-sales.
You’ll either be paying for the pizza to bribe your friends and the rental of a moving van, or the expense of a professional mover. Depending on what was included with the home when you bought it you may be looking for Appliances, Decorating (Carpets, drapes, furniture and painting may be necessary), Home Care Tools (lawn tools, garbage cans and snow removal equipment.) and Utility Hook-Ups (you may have to pay to have the internet, telephone, gas and electricity connected.)
How about some $$$ back:
Ontario Land Transfer Tax Refund to Be Extended
To continue helping families buy their first home and to support job creation in the housing
industry, Ontario passed legislation (fiscal 2000) to extend the Land Transfer Tax (LTT) refund.
The Land Transfer Tax refund applies to first-time buyers of newly built homes. The maximum
refund is $2,000 and equals the land transfer tax payable on a house valued at $227,500.
How do you know if you qualify for a refund?
• You must be at least 18 years old.
• The refund applies to a newly built home.
• Applications for refund must be made within 18 months after the date
• The purchaser must occupy the home as his or her principle residence
within 9 months of the date of conveyance.
• You cannot have previously owned a home, or an interest in a home,
anywhere in the world.
• If you have a spouse or same-sex partner, he or she cannot have owned
a home, or an interest in a home, anywhere in the world while he/she
was your spouse or same-sex partner.
• You cannot have received an OHOSP-based refund of land transfer tax.
GST New Housing Rebate
You may be able to claim a rebate for a portion of the GST you pay on the purchase price or
cost of building your home if you buy a new or substantially renovated home, mobile home,
floating or modular home from a builder or vendor. Or, you buy a share in the capital stock of
a co-operative housing corporation, or construct or substantially renovate your home (or hire
someone to do so). Also applicable if your home is destroyed by fire and is rebuilt. Contact
the Canada Customs and Revenue Agency in your community for the Completion Guide and
Application Form. In most cases, your solicitor will take care of this for you.
• 0.5% on the first $55,000 of the purchase price, plus
• 1.0% on the amount exceeding $ 55,000 up to and including $250,000, plus
• 1.5% on the amount exceeding $250,000 up to and including $400,000, plus
• 2.0% on the amount over $400,000.(Be aware that for non-residential properties, such as
industrial or commercial real estate, there is no 2% charge since the tax rate is 1.5% for
any amount of purchase price over $250,000 regardless of the total price.)
The land transfer tax on a property transferred for $200,000 is calculated as $275.00 on the first
$ 55,000 (0.5% = $ 275.00), plus $1,450.00 on the next $145,000 (1.0% = $1,450.00), for a total
Other Articles in the Owning a Home Series:
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©Dave Williams -2012-