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When buying or selling a home in Ontario, Canada, it’s essential to be aware of the various costs that can add up beyond the purchase price or sale price of the property. Whether you’re a first-time homebuyer or a seasoned seller, understanding these additional expenses will help you budget more effectively and avoid any financial surprises. Here’s a breakdown of the key costs you might encounter.
1. Land Transfer Tax
When purchasing a property in Ontario, buyers are required to pay a land transfer tax. The amount varies depending on the purchase price of the home and the location. In Toronto, there’s an additional municipal land transfer tax on top of the provincial tax. First-time homebuyers may be eligible for a rebate, which can help reduce this expense.
Example Calculation:
For a home priced at $500,000, the land transfer tax would be approximately $6,475.
In Toronto, an additional municipal land transfer tax of about $6,475 would apply, bringing the total to approximately $12,950.
2. Legal Fees and Disbursements
Both buyers and sellers need to hire a lawyer or notary to handle the legal aspects of the transaction. This includes preparing and reviewing all documents, ensuring the title is clear, and handling the transfer of funds. Legal fees often range from $1,500 to $3,000, depending on the complexity of the transaction and typically lawyer fee's for buying a house costs a little more than when you sell a house.
3. Mortgage Insurance
If you’re buying a home with a down payment of less than 20%, you’ll be required to purchase mortgage insurance through the Canada Mortgage and Housing Corporation (CMHC) or a private insurer. This insurance protects the lender in case of default. The premium can be added to your mortgage amount, but it’s a cost that should be considered in your overall budget.
Premium Example:
For a home purchase with a 10% down payment, the mortgage insurance premium could be around 3.1% to 4% of the loan amount.
4. Home Inspection
A home inspection is a crucial step in the home-buying process. It helps identify any potential issues with the property that could affect its value or require costly repairs. They are optional, but a professional home inspection typically costs between $300 and $600, depending on the size and condition of the home.
5. Appraisal Fee
Lenders often require a home appraisal to determine the property’s market value before approving a mortgage. This appraisal fee usually ranges from $300 to $500, depending on the property’s location and size. Some lenders may cover this cost, but it’s wise to budget for it just in case.
6. Realtor Commissions
When selling a home, one of the most significant expenses is the realtor commission. In Ontario, realtor commissions are typically between 4% and 5% of the sale price, split between the buyer’s and seller’s agents. This cost is usually paid by the seller and deducted from the proceeds of the sale.
7. Moving Costs
Whether you’re buying or selling, moving costs can add up. Hiring a professional moving company, renting a truck, or purchasing packing supplies are expenses that should be factored into your budget. Moving costs can range from a few hundred to several thousand dollars, depending on the distance and the amount of belongings.
8. Utility Adjustments
On closing day, buyers and sellers need to adjust for utilities such as water, hydro, and gas. If the seller has prepaid any utilities, the buyer will need to reimburse them for the amount from the closing date onward. Conversely, if utilities are owed, the seller may need to cover the costs up until closing.
9. Title Insurance
Title insurance protects buyers and lenders from potential issues with the property’s title, such as liens, encroachments, or fraud. This one-time premium is usually paid at closing and ranges from $250 to $500.
10. Property Taxes
Buyers should be aware of property taxes in their new location. Depending on when the purchase closes, they may need to reimburse the seller for prepaid property taxes or pay them upfront for the remainder of the year. Property taxes vary by municipality and are based on the assessed value of the home.
Conclusion
Buying or selling a home in Ontario involves more than just the price of the property. By understanding and planning for these additional costs, you can ensure a smoother transaction and avoid unexpected financial strain. Whether you’re budgeting for land transfer taxes, legal fees, or moving expenses, being well-informed will help you make more confident decisions in your real estate journey.
If you’re ready to buy or sell a home and want expert guidance through every step, our team at Platinum Properties is here to help. Contact us today to get started!
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