The cost of buying a home is more than the listing price—and we’re not talking about the bidding wars! Avoid the sticker shock on closing day and make sure you budget accordingly. Here’s a checklist of costs that are involved when purchasing a home.
Before Your Home Purchase
Down Payment
Down payments are typically 5% to 20%. If your down payment is less than 20%, you’ll need to purchase mortgage default insurance.
Home Buyers’ Plan
If you have RRSPs, you can withdraw up to $25,000 to purchase a home with the Home Buyers’ Plan.
Home Inspection Fee
The home inspector evaluates the safety and structure of your home. Although it is optional, many home buyers include this as a condition in their purchase agreement.
Home Insurance
Home insurance protects you in case of fire and other disasters.
Closing Day
Land Transfer Tax
Land transfer tax (some provinces call it land transfer fee) is a percentage of your property value. It varies from 0.5% to 3% depending on your municipality.
If you’re a first time home buyer, you can claim a $5,000 First-Time Home Buyers’ tax credit.
Legal Fees
Ensure your lawyer’s quote includes all expenses required to complete the home purchase.
Sales Tax
Sometimes the sales tax is included in the home purchase price. Work with your mortgage broker to make sure you’re not missing any important information hidden in the legal document!
After Purchasing Your Home
Mortgage Payments
After your down payment and closing costs, there are also your regular mortgage payments to consider. Use a mortgage calculator to see what your regular mortgage payments would be.
Condo Fees
If you live in a condo, don’t forget to include your condo fees in your monthly budget!
Property Tax
Property taxes and payment schedules vary by municipalities. Property taxes can be anywhere from 0.5% to 2.5% of your property value. Some municipalities allow you to set up pre-authorized monthly payments to debit your property tax bill. For more details, visit your municipality’s website. Here are the links to Canada’s most populous cities:
- Toronto Pre-Authorized Tax Payment Program
- Montreal Instalment Plan
- Vancouver Tax Instalment Prepayment Plan
- Calgary Tax Instalment Payment Plan
- Edmonton Monthly Payment Plan
You can also roll your property tax with your mortgage lender. This method offers the convenience of one less bill to worry about. Your mortgage lender will collect a set amount every month along with your mortgage payment. When the tax bill arrives, your lender will ensure it is fully paid on time on your behalf. The Property Tax Service is complimentary.
Other Things to Consider
Mortgage Life Insurance
Mortgage Life and Disability Insurance pays your biggest expense—your mortgage—when you can’t. You can feel protected knowing that you won’t have to sell your family home if something unexpected happens to you.
Mortgage Broker
Purchasing a home is a complicated process, but your mortgage broker can make it easier. They are experts in the field and will be able to assist you in the whole process. There are also no costs associated with using a mortgage broker.