Buying a home
How much will it really cost?
Once you have determined the price range you can afford and the type of mortgage you qualify for, you will need to calculate all of the associated costs of the transaction to make sure you are financially ready.
It’s wise to plan ahead to cover the many ‘up-front’ costs of buying a home. Timing is important to help make sure things go smoothly.
• Mortgage Loan Insurance Application Fee and Premium. If yours is a high ratio mortgage (less than 20% down payment), you may need mortgage loan insurance. The lender will add the mortgage insurance premium to your mortgage or you can pay it in full upon closing.
• Appraisal Fee. The mortgage lender may require that the property be appraised at your expense. An appraisal is an estimate of the value of the home. The cost is usually between $250 and $350 and must be paid when you contract for those services.
• Deposit. This is part of your down payment and must be paid when you make an Offer to Purchase. The cost varies depending on the area, but it may be as little as 5% of the purchase price. If you wish to make a down payment of 5% and you give a deposit of 5%, then your down payment is considered to be accounted for already.
• Down Payment. Minimum of 5% of the purchase price is required for a high-ratio mortgage and at least 20% of the purchase price is required for a conventional mortgage.
• Home Inspection Fee. Remember that this may be a condition of your Offer to Purchase. A home inspection is a report on the condition of the home and may cost over $400, depending on the complexities of the inspection. For example, it may be more costly to inspect a home that has large square footage, one that is expensive or one where contaminants such as pyrite, radon gas or urea-formaldehyde are suspected.
• Land Registration Fees (sometimes called a Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchases Tax). You may have to pay this provincial or municipal charge upon closing in some provinces. The cost is a percentage of the property’s purchase price and may vary. Check with your lawyer/notary to see what the current rates are.
• Prepaid Property Taxes and/or Utility Bills. To reimburse the vendor for pre-paid costs such as property taxes, filling the oil tank, etc. • Property Insurance. The mortgage lender requires this because the home is security for the mortgage. This insurance covers the cost of replacing the structure of your home and its contents. Property insurance must be in place on the closing day.
• Qualifying Rate. For high ratio loans with a fixed rate term of less than 5 years and for all variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of the benchmark rate, and the contract interest rate.
• Survey or Certificate of Location Cost. The mortgage lender may ask for an up-todate survey or certificate of location prior to finalizing the mortgage loan. If the seller does not have one or does not agree to get one, you will have to pay for it yourself. It can cost in the $1,000 to $2,000 range. A survey may be replaced by a requirement for Title Insurance for a lesser amount.
• Water Quality Inspection. If the home has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is potable. You can negotiate these costs with the vendor and list them in your Offer to Purchase.
• Legal Fees and Disbursements. Must be paid upon closing and cost a minimum of $500 (plus GST/HST). Your lawyer/notary will also bill you direct costs to check on the legal status of your property.
• Title Insurance. Your lender or lawyer/notary may suggest title insurance to cover loss caused by defects of title to the property.
courtesy of Mortgage Brokers Ottawa