Have you ever wondered what the side costs of buying a home in Canada are?
In this article, we are going to provide you with information about the side costs of buying a property in Canada that would help you make the best decision.
To buy a house in Canada, you always have to spend more than the price of buying and renting a truck. First-time buyers are often shocked when they are faced with the total amount they have to pay on the day of the charter. If you know in advance what to expect, you can prepare yourself financially. When it comes to overpaying and regular mortgage installments in Canada, then nothing on Surprise Day will be a surprise. In addition, with this in mind, you can negotiate with your broker or lender to reduce some of these costs. But these costs are?
Home purchase collateral in Canada
When you make an offer to buy a house in Canada, you are expected to make a deposit. This reassures the seller that you will actually buy it on the day of the contract, and if you do not, the seller will keep the deposit. If you enter a house transaction, this deposit will be fully disbursed to purchase the house. There is no set amount for a deposit, but in general, the higher the deposit amount, the more likely you are to be a serious buyer, and this amount can ultimately eliminate interest costs for you. Our Morgue hand calculator can even show you how different amounts of deposit can drastically change your total interest rate. And remember – a deposit is different from a down payment!
Home Inspections Expert cost
The estimations show a price of 350 to 600 Canadian Dollars. So, to save money some costumers may think that they do not have to get a home inspection expert involved but you should know that this cost is way lower compared to the cost that you may have to pay later due to not doing this step. The cost of a home inspection in Canada usually depends on the size of the house you are going to buy. And some lenders even require a professional inspection before issuing a mortgage to you.
If you are planning to sign a house in Canada right now, you need to call a home inspection expert immediately, so you have the opportunity to discover potential property issues sooner.
A professional licensed expert knows every single details in a home and thus, can carefully examine items such as roofing or building foundations. Because such defects in the home can be very costly and you may want to share them with the dealer, you should entrust the home inspection to a specialist who can ensure the structural safety and proper operation of all systems.
Home appraisal cost in Canada
A home or property appraisal is a third-party professional’s assessment of a home and property’s market value. An appraisal is independent, unbiased and also based on factors like the home condition, age of a home, a home’s amenities, the home’s previous sales price, and many more.
The appraisal fee for a standard Toronto freehold home begins at $495.00, depending on size and location.
The lender only pays you a lot of money when you want to get a mortgage. The amount they lend to you will be either a percentage of the appraised value of your home in the Canadian market, or a percentage of the purchase price of the home, often whichever is lower.
In any case, you often have to pay for the evaluation services, which are between $ 300 and $ 500. Some lenders charge a financing fee, depending on your credit history, although most will waive this fee. Costs vary from lender to lender.
Land valuation: $1,000 to $2,000
Most lenders will ask you to evaluate the land where the boundaries of the land are marked so that there is no confusion about the neighbors’ property later. Although they may accept the last appraisal of the property – depending on when the appraisal last took place – it may need to be done again.
Legal costs of buying a home in Canada: $500 to $1,000
Real estate agents manage all legal documents upon receipt of mortgages. Once you have purchased the home, they will prepare the mogul contracts for you and assess the property to make sure there are no mortgages or previous debts. Although your lender’s lawyer can do some work, the number of paperwork is very large and you need to make sure that everything is approved by your lawyer, and you are responsible for the cost of this part. Attorneys’ fees can be very high and include HST if possible.
Land transfer tax: 0.5 to 2% of property value in Canada
Everyone who buys a property must pay LTT. LTT is one of the taxes that you have to pay to the province when you buy “land” or simply when you buy a house or a condo.
Land transfer tax must be paid after the transaction is closed, and up to 30 days after the closing.
Every province in Canada has its own land transfer tax, except for Alberta and Saskatchewan.
However, home buyers in these provinces still pay a small fee for the transfer. In addition, some municipalities, such as Toronto, have an additional tax called the Urban Land Transfer Tax.
Most provinces use a multi-layered system to calculate your tax debt. In Ontario, for example, if you buy a house in Canada for $ 250,000, you will have to pay 0.5 percent for the first $55,000 and one percent for the remaining $195,000. So for a $250,000 house, you end up paying $275 + 1950, and a total of $2,225 in land transfer tax.
Harmonized Sales Tax: Dependent on the province in Canada
The Harmonized Sales Tax (HST) is a 15 percent provincial sales tax that applies only to New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island and Ontario, which is 13 percent in Ontario. HST tax applies to the purchase price of all new homes, but does not apply to resale house prices. This tax also applies to all services, including attorney’s fees, real estate consulting commissions, home inspections and your relocation costs.
New home warranty
If your home is a new home (i.e. you are the first owner), a warranty protects your investment. In Ontario, British Columbia and Quebec, a new home warranty is required. You pay this fee once and depending on the coverage and price of the house, it costs several hundred dollars.
Life insurance and/or life insurance mortgages: rates may vary
While mortgage insufficiency insurance supports the lender, you can consider life insurance mortgage to support yourself. If, for some reason, you are unable to pay your mortgage installments, this type of insurance protects you and your family. This way, no burden is placed on you and your property.
The insurance of inability to pay mortgage: 1.75% to 2.95% of the mortgage value
If you are applying for a high mortgage ratio (i.e. your down payment is less than 20%), the lender will require you to purchase mortgage insurance. This type of insurance protects the lender if you can no longer pay your loan installments. Most lenders also ask you to protect your home with fire insurance and extensive coverage. Often, this type of insurance can be calculated in monthly mortgage installments.
Home insurance
Although property insurance is not required in all Canadian provinces, this insurance protects you against events such as defects, errors or omissions. Among the errors that may occur in public records and existing reviews. Property insurance also protects you from anonymous heirs who may try to claim your property or illegal mortgages.
Home insurance (also known as property insurance) covers any damage inside and outside the home. If you are a first time buyer, you have probably never bought home insurance before. But if your current property has insurance and you want to transfer it, you must first cancel your old insurance policy.
The cost of property insurance is approximately $300, although it depends on the type of property (resale, new, condo) and the purchase price. But the cost is really low in comparison to the peace of mind it brings you. But remember to ask your lawyer for more information and details.
In other words, the cost of insurance policies may vary, as each property has a different area, different age, additional structures, and more. Although you can continue to work with your current insurer, it is better to look for new and better rates. You will not even imagine about how much you can save on your premium by using a different insurer.
How can we save up while buying a home in Canada?
For first-time homebuyers in Canada who are financially disadvantaged, the government has plans, programs and tax credits to help offset some of the costs of a new home. These programs include:
First-Time Home Buyer’s Tax Credit (HBTC)
HBTC Tax Credit is a non-refundable tax credit for eligible buyers. To calculate HBTC, the lowest personal income tax rate is multiplied by $5,000 per year. For example, in 2017, the minimum rate was 15%, so HBTC in 2017 was $750.
If you are buying a home for the first time, you will probably qualify HBTC. But have this in mind that you must not have owned a home for at least four years prior to the purchase date.
Home Buyer plan
As a first-time home buyer in Canada, you are eligible for the Home Buyer Plan, which allows you to withdraw up to $25,000 from your Retirement Savings Plan (RRSP) to cover your down payment.
Whatever amount you withdraw, you must repay it in full within 15 years, and a certain amount will be added to the main amount at the end of each year. If you are unable to repay it on time, the remaining amount will be added to your personal income that year and you will have to claim it on your income tax.
Land transfer tax rebate
Depending on the province, those who want to buy a home for the first time can experience a reduction in land transfer tax. Cities with land transfer taxes may also offer a special discount for first-time buyers.
Property relocation costs in Canada
Transportation costs depend on your personal preferences. Although these costs can be stressful, if you do it yourself you can save a lot of money. But do not forget that if necessary, you should also consider the cost of a rental truck. On the other hand, you can ask a shipping company to do this for you. Again, the costs will vary depending on whether you want to pack your furniture, or just move it.
What costs do we have to pay for using a bank loan?
Usually, when you buy a house in Canada with a bank loan you have to pay for a lawyer or notary. If you have paid less than 20% of the down payment, you will also have to pay the loan insurance fee in full so that in case of death, your installments will be paid by the insurance. In addition, if you get help from a real estate consultant, you will have to pay a fee based on the agreed amount.
Finally, you will be responsible for the transfer tax. This cost usually varies between 1.5 and 4%.
You just have to check all the costs before buying a house in Canada. Sometimes neglecting ancillary expenses such as building repairs, property transfer taxes, notarized fees, or loan insurance can cause you great problems. It is best to seek the help of a qualified lawyer and consultant to be honest with you about costs. Buying a smaller home would be better than borrowing heavily.
Other costs to consider for buying a home in Canada
You may also need to consider the following costs, so consider them carefully as they may affect your budget:
1. Home Appliances
2. Renovation or repair
3. Service costs
4. Condo costs
5. Gardening costs
6. Snow removal equipment
