In this article, we discuss what are necessary and unnecessary home-buying costs in Toronto and the GTA: helping you make smart decisions with your money

Do: Ensure you are shopping in the right location.

Buying may seem out of reach – but that could be because you’re shopping in the wrong location. The average selling prices are topping $1.1 million for single detached homes and condos in the Greater Toronto Area. But beyond, bargains can be found.

Have you considered:

• Moving a bit further out?
• Moving closer to walk to work and shopping?
• Asking family for help with a down payment?
• Moving in with family to save for the down payment?
• Downsizing?
• Upsizing to rent out spare rooms or a basement suite?
• Sharing a mortgage with friends?
• Building co-housing to make new friends?

All of these could help you, plus extra incentives are offered for first time buyers 

Do: Make your deposit quickly 

Putting down 2-5% of the sales price upfront proves that you’re a serious buyer, putting you at the front of your competition. You can pay up front when you make an offer or 24 hours after it’s accepted.

Don’t: Make your deposit before consulting a qualified real estate lawyer to review your contract

Be careful! Depending on how your agreement of purchase and sale is written, you may get your funds back if the deal falls through. But you also risk forfeiting the full amount if you walk away without just cause. Real estate lawyers review your offer to purchase before you submit it to protect your right to get your deposit back.

Do: Make sure you fully understand the terms of your mortgage, and the costs that you may have to pay, such as mortgage origination fees and mortgage loan default insurance

Mortgage Origination Fees

Sometimes your mortgage lender will charge a mortgage origination fee right up front – which would be either $100 to apply for a loan or a percentage of the loan amount may be added to your mortgage. These fees include covering processing costs and checking your credit history.

Mortgage Loan Default Insurance

A low down-payment will incur extra charges. Canada Mortgage and Housing Corporation (CMHC), Canada Guaranty or Sagen Mortgage insurers keep down payments low (under 20%) by requiring insurance premiums.

How Mortgage Default Insurance works:

For homes worth under $1 million, this insurance protects the lender’s investment if you default. You lose your down-payment and title to the home if you walk away or can no longer afford your home. For insured mortgages, down-payments are 5% for the first $500,000 and 10% for the balance of your home’s sales price. Insurance premiums are currently 0.60% to 4% of your home’s purchase price or value – and this figure applies after improvements or renovations have been made. Here’s the golden rule: the more money you put down up front, the less you pay in insurance.  Premiums are due when you borrow or can be stretched over your mortgage’s life (amortization) for up to 25 years.

Don’t: Forget that there are several insurances that you will need, including:

Title Insurance: Mortgage lenders protect the title to your property by adding a title insurance policy, starting at around $250 + HST. It protects you from title errors, fraud or forgery, claims against title by previous owners or neighbours and/or municipal easement.

Homeowner’s Insurance: Obligatory for mortgages, you can’t complete the sale without a home fire insurance binder. How much you buy is up to you, but mortgage lenders are looking for the replacement or rebuilt value of your home for exceptional events like fire and water damage. Wind storms that tear up the roof or siding are included in most policies, but you pay extra for riders such as floodplain insurance or overland flooding from snow melt. Do your research – know what weather events your location is geographically vulnerable to and ensure that your insurance covers them. 

You should budget an average of $20 to $50 a month for a condo or $80 to $200 for a home. Rates are based on age, location and condition – always check with an insurer to confirm how much your home insurance will cost.

Do: Make sure your home is priced fairly

Property appraisers compare your home’s fair market value to the purchase price based on its size, age, condition and location – these cost $350 to $700. More importantly, you could be asked by your lender to pay the difference between the appraised value and purchase price if they are too far apart.  

Don’t: Skip the home inspection!

A non-invasive — meaning visible, accessible inspection and not a review of building code compliance — home inspection gives you a professional opinion of the condition and performance of a home you want to buy. Average fees for registered, certified inspectors start at $525 and up.

Do: Be aware of all the taxes you have to pay

You are responsible to ensure the payment of many taxes, including:

Ontario Land Transfer Taxes (Provincial Land Transfer Taxes):

Provincial land transfer taxes (LTT) are due upon closing. Your LTT is based on the purchase price of the land plus any mortgages you assume when you buy a home, not the appraised value. These taxes are calculated on a graduated scale, from $275 for the first $55,000 (0.5% of purchase price) to up to 2% for balances over $400,000.

Toronto Municipal Land Transfer Tax

Toronto residents must also pay MLTT, in increments based on your home’s value, from 0.5% for the first $55,000 up to a top rate of 2.5% for homes valued over $2 million. Average Toronto home buyers pay 1% on the difference between the first $55,000 and next $250,000, 1.5% for any amount between $250,000 and $400,000 and 2% on remaining balances up to $2 million.

Foreign Buyers’ Taxes

Foreign buyers are subject to federal and provincial taxes that encourage using purchased properties as rentals or principal residences. 

HST

HST or harmonized sales tax is paid when you buy a new home (13% of the purchase price), on legal fees and disbursements, mortgage appraisals, home inspections, property surveys and real estate commissions. Resale homes are exempt. Some new, renovated or rebuilt homes and housing shares qualify for HST rebates. 

Do: Prevent hidden costs and unnecessary fees by hiring a real estate lawyer

We are a full-service residential real estate law firm providing fixed closing costs to our clients when they refinance, buy, sell, mortgage, or title transfer their property. We offer flat rate fees – no unpleasant surprises when you get your bill. We also service all properties within Ontario–with over 35 locations in Ontario and growing we are where you are!

At RealEstateLawyers.ca LLP we do it all – from thoroughly checking land transfer tax affidavits for accuracy, to researching title to the property for liens or debts that could prevent you from your real estate closing.

Book an in-person appointment with one of our GTA real-estate lawyers in minutes by using our simple and easy online form. Appointment hours are convenient and flexible, we offer our services 7 days a week to fit your schedule.

Or, you can meet with our Toronto real estate lawyers virtually through our confidential and secure Ontario-wide video conferencing. We make e-signing easy, or we can deliver documents to your doorstep.

Contact us to work with a top home-buying lawyer in Toronto today to ensure your successful real estate transaction and your peace of mind.