10 Hidden Costs of Buying A Home

“Average closing costs usually range from $3,000 to $5,000. Knowing what the hidden costs are will help home buyers avoid unpleasant surprises and properly plan their financing.” Bob Tillmann, Vice President, Secured and Term Lending, Canada Trust.

1. Legal fees and disbursements – these should be negotiated up-front with your lawyer or notary to avoid any misunderstanding later and to help you better assess your cash requirements. The fees and disbursements are approximately $1,000. TIP: Ensure you deal with a real estate lawyer. They are more likely to be aware of the issues specific to your needs.


2. Land Transfer Tax – in Ontario you have to pay a land transfer tax. TIP: More information about Ontario's Land Transfer Tax is available on my website. Be sure to consult with your lawyer to confirm the Land Transfer Tax amount due.


3. Processing Fees – covers property appraisal, building inspections, administration fees and the processing of documentation for your mortgage. This is paid to your lender ($150 to $200) for a conventional mortgage or if you have a high-ratio mortgage, to CMHC ($235). TIP: Get a qualified home inspector to check out the house before you commit to buying, either new or resale. For about $300 - $400 they will tell you what you need to repair or replace and how much it will cost. Build it in as a condition on your offer.


4. Land Survey – most lenders require a survey of the property done by an accredited land surveyor. This will establish whether the building is located within its specified legal boundaries and complies with local building bylaws. The cost is usually about $500, but could be higher in complex cases. TIP: When purchasing an existing house include a condition in your offer to purchase that the present owner provide the existing survey if it is available.


5. Closing Adjustments – includes any necessary adjustments between you and the vendor for property taxes, insurance and heating fuel that has been prepaid. TIP: Make sure you are clear on what payments the vendor has made and what charges are being transferred to you. Your lawyer can help you with this calculation.


6. Fire insurance – mortgage lenders require that you have fire insurance coverage for the amount of the mortgage or the value of the buildings, whichever is less. This cost will vary depending on your property value, the insurance company and the municipality. TIP: Shop around to compare prices and find the most appropriate home insurance policy to meet your needs.


7. Moving expenses – can include having someone pack your valuables, load them onto and off of a moving truck, the travel time between locations and moving insurance. The average cost for a local move may range from $500 to $1,500. The costs vary from company to company depending on how much and how far you are moving. TIP: Moving companies will often offer discounted storage rates if your closing dates don’t coincide.


8. Hook Ups – telephone, cable, heat, water, gas and electricity services charge for switching the existing service over to the new homeowner. The price of installing new service hook up will be much higher. TIP: Call the service providers in advance of your move to get estimates in your new area and compare offers and fees to save both time and money.


9. Decorating – although most decorating can be done gradually, some things, such as plumbing fixtures, paint, curtains, blinds, carpets and furniture may need to be bought or replaced right away. TIP: Taking possession of a resale home before you move in makes it easier and often less expensive to paint, wallpaper, lay carpet or refinish hard wood floors before the furniture arrives.


10. Appliances – may be included in your purchase price so you can pay for them over the term of your mortgage. If not, you may need a substantial amount up-front. Prices for a fridge, stove, washer, dryer, dishwasher and freezer range from a low-end $2,500 to $12,000 and beyond. TIP: Write into your offer to purchase any appliances in the house you would like (or expect) to stay. This also allies to curtains, blinds, light fixtures, etc.

1. HOUSE INSPECTION FEES: If you’re buying a resale home, before committing, you should have the home inspected by a professional building inspector to assess any structural problems or required repairs. Expect to pay $300-$400 for the inspection.


2. LEGAL FEES: You will need a lawyer to act on your behalf in purchasing and mortgaging a property. A lawyer also takes care of details like the transfer of the deed. You’ll likely pay at least $750 to your lawyer, but fees vary, so get an estimate ahead of time and ask what is included in that price.


3. SURVEY OR TITLE INSURANCE: To close a home purchase, you need an up-to-date survey of the property, which specifies its size and shape, the type and size of the building, including additions, and the location of these buildings. If the vendor doesn’t provide an acceptable survey, you will need to pay a land surveyor about $750 for a new one. Alternatively, title insurance can be purchased for less and protects the lender and buyer against loss or damage due to an inaccurate survey. It provides coverage for any existing bylaw violations (like a building being too close to a sidewalk or other public property, or a driveway being too wide), encroachments, legal rights of access and other title-related problems that could devalue the property.


4. LAND TRANSFER TAX AND GST: You will pay a one-time provincial tax based on a percentage of the purchase price of the property, which is calculated on a sliding scale. For example, if you purchase a property for $260,000 in Ontario, 5% is charged on $55,000, 1% is charged on $55,00 to $250,000, while the $250,000 to $400,000 range is taxed at 1.5%. Your total tax bill will add up to $2,375. Land transfer tax rebates are available from the government to first-time buyers of newly built homes to a limit of $2,000. Newly build homes as well as substantially renovated houses are also subject to GST, and some new-home builders include this tax in the cost. Be sure to ask if GST is included or not.


5. ADJUSTMENT COSTS: You will be responsible for your share of any costs for utilities, fuel or property taxes the current owner has prepaid. Sometimes property taxes have been paid by the previous owner for up to half a year in advance, for example. These expenses will be calculated by your lawyer and must be paid at the time of closing; they will be detailed in your Statement of Adjustments.


6. MORTGAGE INSURANCE: If your mortgage is more than 75% of the property’s selling price, it is considered high-ratio, and as the homebuyer you must buy insurance to protect the lender in case you default. The insurance is provided by the Canada Mortgage and Housing Corporation CHMC, and is calculated on a sliding scale based on the ratio of mortgage to home value.


7. MOVING COSTS: Don’t forget the movers. Count on paying $1,000 or more, and make sure your new home insurance commences the day you take ownership.


8. SETUP COSTS: If you’re planning to install a telephone, cable, satellite, Internet access or an alarm system, you may face connection charges. Some service and utility companies ask for a sizable security deposit up front if you don’t have a previous history of bill payment.