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"Typical" Real Estate Transaction Costs

These are 'typical' additional costs associated when buying real estate in Ontario - more particularly in Mississauga and the GTA.

DEPOSIT

The deposit is part of the Purchase Price and will be required by your Selling Agent usually upon acceptance of the offer.  The deposit is your money and is credited to your account upon the closing of your purchase on the closing date.  You will need the deposit when you are submitting your offer.

Generally five to ten percent of the purchase price is the expected amount, usually $5000 to $10,000 for a condominium or townhome purchase and $5,000 to $20,000 (or more) for a detached home purchase.  Not everyone has the money in an accessible account so a split deposit - part now and the rest at a later date and before the closing, is sometimes acceptable.

If you have a home to sell or have sold your current home, your bank will give you a line of credit for the deposit and you will sign a document called a letter of direction, that says you will pay the credit line off from the proceeds of your house sale.  

HOME INSPECTION

A home inspection has become almost standard and I highly recommend a home inspection for a detached, semi detached and townhomes in our area.  An inspection usually costs between $375 and $550 for most homes but increases with the cost of the home over $400,000.  The companies that we recommend usually charge a base of $400 to $475.  See my list of house inspectors here.

Home Inspection Issues, concerns, tips and information

LEGAL FEES

You will need a lawyer to search the title and cover all the legal matters.   Rates vary greatly, starting at about $450 for the lawyer's time.  In addition you must pay for the disbursements which the lawyer pays on your behalf.  The average total bill should run to approximately $1100 - $1200.  Shop around! Call some lawyers and get quotes for comparison.

Following is a list of common disbursements and the costs that your lawyer passes along to you:

• search title.
• gas, hydro, water and tax certificates.
• sheriff's certificates as to executions.
• zoning compliance certificate.
• Status Certificate (used to be called an estoppel certificate) for a condominium townhouse or high rise or any condominium type of property, photocopy and long distance etc.
• sub search before closing.
• land transfer tax.
• register deed.
• register mortgage.
• survey.

TITLE INSURANCE

Everyone who is involved in buying real estate in the US is familiar with "title insurance" but in Canada this is a recent option to buyers.  In many cases it can save you money.  In addition, some title insurance companies offer a mechanical and appliance warranty.  Be sure to ask your lawyer about "title insurance". Approximate cost is $300 and up.

LAND TRANSFER TAX

Click here to use my Land Transfer Tax Calculator

Payable on closing - it is a multi-tiered formula and applies to the purchase price only:

Price between $ 55,000 - $250,000 ………… price x 1 % less $ 275
Price between $250,000 - $400,000 …………price x 1.5% less $1,525
Price over $400,000 ………….........................price x 2 % less $3,525

Land Transfer Tax is almost double the amounts above if you are purchasing in the City of Toronto, see here

MORTGAGE LOAN INSURANCE AND APPLICATION FEE

If you obtain a high ratio mortgage ( a mortgage where you pay less than 25% down payment) you will have to buy mortgage loan insurance from CMHC or a private company.  If you qualify for a 5% down payment, CMHC charges an insurance fee that equals 2.75% of the mortgage.  If you put 10% or 15% down, your insurance fees will decrease to 2.0% and 1.75% respectively.  The insurance premium is usually added to your mortgage principal amount on closing, this way you do not have to come up with the additional amount of the insurance premium.  

 

Loan-to-Value Premium on Total Loan Premium on Increase to Loan Amount for Portability and Refinance
Standard Premium Self-Employed without 3rd Party Income Validation Standard Premium Self-Employed without 3rd Party Income Validation**
Up to and including 65% 0.50% 0.80% 0.50% 1.50%
Up to and including 75% 0.65% 1.00% 2.25% 2.60%
Up to and including 80% 1.00% 1.64% 2.75% 3.85%
Up to and including 85% 1.75% 2.90% 3.50% 5.50%
Up to and including 90% 2.00% 4.75% 4.25% 7.00%*
Up to and including 95% 2.75% N/A 4.25%* *
90.01% to 95% —
Non-Traditional Down Payment***
2.90% N/A * N/A
Extended Amortization Surcharges
Greater than 25 years, up to and including 30 years: 0.20%
Greater than 30 years, up to and including 35 years: 0.40%

For portability and refinance, the premium is the lesser of Premium on Increase to Loan Amount or the Premium on Total Loan Amount. In the case of portability, a premium credit may be available under certain conditions.

* Premiums shown with an “*” do not apply for refinance. For portability the maximum LTV ratio is 90%, but CMHC may consider higher LTV ratios when the new ratio is equal to or less than the original LTV. For portability, the premium is higher for non-traditional down payments on Increase to Loan Amount.

** For conversion from Self-Employed with traditional 3rd party income validation to Self Employed without traditional 3rd party income validation, the premium is the lesser of: a) the Premium on Total Loan Amount or; b) the outstanding balance multiplied by a 1.5% premium plus the Premium on Increase to Loan Amount.

*** Down Payment Requirements – Traditional sources of down payment include: Applicant’s savings, RRSP withdrawal, funds borrowed against proven assets, sweat equity (<50% of min.required equity), land unencumbered, proceeds from sale of another property, non-repayable gift from immediate relative, equity grant (non-repayable grant from federal, provincial or municipal agency). Non-traditional sources of down payment include: Any source that is arm’s length to and not tied to the purchase or sale of the property, such as borrowed funds, gifts, 100% sweat equity, lender cash back incentives.

Premiums in Ontario and Quebec are subject to provincial sales tax. The provincial sales tax cannot be added to the loan amount.

 

Refer to www.cmhc-schl.gc.ca for more information.

SURVEY (Freehold Only)

You, your bank and/or your lawyer want to know exactly what it is that you are buying.  A survey that shows the lot dimensions and the location of any structures is very important.  If the Vendor does not have a current survey or if the vendor will not give representations and warranties on closing and your bank is insistent then you may be required to have a new survey drawn up.  A new survey may cost about $900 and up. 

Another option is Title insurance and can often be used in place of a new survey, typical cost is $300 to $400 for title insurance.  Your lawyer can best advise you on which route to go

REALTY TAXES

If the Vendor has paid the full year's taxes in advance, the Purchaser will partially reimburse him, adjusted to the date of closing.  This becomes part of the "Statement of Adjustments " prepared by your lawyer.

OIL HEATING

If the property is heated with oil, convention dictates that the Vendor must fill the tank for closing and then the Purchaser reimburses him on closing. NB: If you are switching to gas then make sure that your lawyer and the Vendor know well in advance of closing so the tank isn't filled.  This is part of the "Statement of Adjustments ".

HOUSEHOLD INSURANCE

The house must be insured prior to closing.  The annual premium will be about $400.00 and up.  Many insurance companies will not insure homes with less than 100 amp service or with the old style "knob and tube" wiring, which is present in most older homes.  This added cost can be determined during the inspection.

GST ON RESALE HOMES

There is NO HST payable on resale homes unless the owner has been carrying on a business in the home and applying for tax credits, in which case the HST is his responsibility.

GST ON NEW HOMES

The 5% GST applies to new housing, however, there is a rebate (to the builder) up to a maximum of 2.5% on homes which cost less than $450,000. Generally, this rebate will reduce the overall GST rate, talk to your lawyer about this. New rules with the HST, please check the Ontario government HST websites

MOVING COSTS

Moving costs vary widely and can range from $500 and up. For a local move, many companies advertise in the yellow pages. For example you can get '3 men and truck' for $90 per hour. Shop wisely.

Movers that I trust are here.

FREE ONLINE handy moving cost estimator!

26 Excellent Articles about Buying or Selling your home and selecting a realtor

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