When you buy a house, you usually think of one cost: the amount you will pay above what your mortgage is. There are, however, a lot more.
- Land Transfer Tax. There is provincial LTT, and if you’re in Toronto, municipal LTT too. LTT is approximately 1.5% of the purchase price, and is payable on closing, so you have to have it available in order to buy your house. There are rebates available for first time buyers, and you should check whether you’re eligible, but be prepared to pay this up front.
- Mortgage costs. Some banks charge you to do an appraisal; some charge a lender fee. If you’re putting down less than 20%, you will definitely have to pay for mortgage default insurance, and while they often will simply add that to your mortgage, you will have to pay the tax on it up front. Budget accordingly.
- Property taxes, condo fees, fuel tanks: all of these are adjusted on closing so that each party pays their proportionate share for the year or month. You will want to speak to your lawyer about what you should expect to have on hand to be able to pay for these.
- House insurance. Whether or not you are getting a mortgage, you will want to have insurance in place, and you will usually have to pay at least a portion of it up front so that it is available for closing.
- Legal costs. Many lawyers (including our firm) will give you an estimate of legal fees and disbursements before you make a decision about who to hire. Get a quote if you can so that you know how much to set aside for this.
- Title insurance. This is a one-time premium for insurance to protect against fraud, as well as against a former owner doing something to the house that was not permitted. If you’re getting a mortgage, it’s effectively mandatory; even if you’re not getting a mortgage, it’s usually a good idea.
