To the unaware, the hidden costs of buying a home in Canada can come as a nasty surprise. In the worst case, you may find that despite all your careful saving, you don’t have the funds you need to complete the transaction. Fortunately, with a little prior planning, you can budget for these costs, and ensure the entire process goes as smoothly as possible.
Inspections, Valuations & Surveys
The value of any property is generally determined by appraisals and surveys. The exact fees vary by province and the type of property, but below are some general figures. It falls to the buyer to cover the cost.
Home Inspection: $500
Inspectors will carry out an evaluation of the property and provide a written report of their findings. This is a check for structural integrity and any potential underlying problems with the property and can save you problems further down the road.
Property Valuation/Appraisal: $200 – $350
An appraisal is required by mortgage lenders before they can approve a loan, and it gives an idea of the value of the property. The sale price may or may not reflect this figure, but lenders will use it to serve as collateral for the loan. Factors such as square footage, number of rooms, age and location are used to determine the value.
Property Survey: $1,000 – $2,000
Some lenders may require an updated property/land survey to be completed before you can purchase your new home. This marks the boundaries and placement of utilities and structures, as well as covering any easements or encroachments.
Taxes & Legal Fees
Taxes and legal services are both necessary when buying property, and it’s worth being aware of what kind of costs to look out for.
Land Transfer Tax (Variable)
This tax varies by province and city, and it is generally calculated in accordance with the purchase price of your property. Most provinces will charge a tax whenever property changes hands, and additional municipal taxes may also apply within certain cities.
Goods & Services Tax (GST)
GST is typically only applicable on new houses, and is occasionally included in the sale price. The tax is calculated based on the sale price of the property, and is generally around 5%.
Legal Fees: $1,200 – $2,500
When purchasing property, you will require a lawyer and notary services to ensure everything is above board. When asking for a quote from a lawyer, be sure that their price is inclusive of additional expenses, rather than just legal fees. Lawyer and notary fees invariably differ from purchase to purchase, but are often reflective of the sale price. You may receive a discount if you use the same legal services as the seller.
Once you have the keys to your new home in your hand, it’s a good idea to protect your purchase. You never know what the future holds, but the right insurance helps you be sure that yours is secure.
Title Insurance: $150 – $350
This optional insurance offers peace of mind, and can protect you from a number of potential issues, such as title fraud, encroachment issues, and unresolved problems left by the previous owner. This one-time payment differs in price depending on location and purchase value.
High-Ratio Mortgage Insurance
All buyers with a less than 20% deposit are required to take out mortgage insurance. The one-time payment generally costs between 0.5% and 4.5% of your mortgage value, and can be paid up front or added onto your mortgage payments.
Mortgage Life Insurance
While not required, this is a useful policy to take out if you have a family. In the event of your, or your spouse’s premature death, all or a part of your mortgage will be paid off.
Home Insurance: $500 – $2,000
Basic home insurance protects your home and its contents. It’s worth doing some research and finding out exactly what is covered, but generally theft, fire, flooding and severe weather come as standard.
The little details can seem endless, but they’re well worth considering. These are the things you’ll need to take care of before, during and after you move, in order to enjoy a stress-free purchase.
- Prepaid Taxes and Bills: $500 – $1,000; As a new homeowner, it’s your responsibility to reimburse the seller for any prepaid property taxes or utility bills.
- Strata Maintenance Fees: In condo buildings, you’ll be required to pay a certain amount towards the upkeep and maintenance of the communal areas.
- Moving Costs: $500 – $5,000
- Redecorating & Furnishings
- Parking Permits
- Garbage Collection
The list may look intimidating at first glance; however, knowledge is power. If you enter the process of purchasing your new home with your eyes wide open, you will find the whole experience far less stressful. Buying a home will never be cheap, but by putting a little extra aside to cover the hidden costs you’ll find that it is more than manageable.
This article is intended for informational and orientation purposes only and should not be deemed as legal, financial or investment advice or solicitation of any kind. Before purchasing real estate or insurance, always consult with a licensed attorney, financial advisor, insurance agent and real estate broker.