By: Nicole Stirk

Carrying & Closing: Costs To Consider When Buying A Home

Home Owners Celebrating

First, let me start by pointing out that there are two types of costs associated with purchasing a home: closing and carrying. Closing refers to expenses you will incur on and/or prior to closing day. Carrying costs, however, are the reoccurring expenses you should allow for after you take ownership of your new home. So, let's get into it.

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CLOSING COSTS

HOME INSPECTION

Home inspections are often included as a standard condition in the purchase and sale agreement and are facilitated to protect the buyer. Depending on the size of the home, inspections may vary anywhere from $200-$500. Although I would never suggest purchasing a home without conducting a thorough home inspection, they are not a requirement.

LAND TRANSFER TAX

In the province of Ontario, buyers are required to pay land transfer tax when purchasing a property. The amount owing is based on a sliding scale percentage of the purchase price. The percentages are outlined below.

Ontario Land Transfer Tax

  • 0.5% of the value of the property up to and including $55,000
  • 1% of the value which exceeds $55,000 up to and including $250,000
  • 1.5% of the value which exceeds $250,000 up to and including $400,000
  • 2% of the value between $400,000 and $2,000,000
  • 2.5% for amounts exceeding $2,000,000, where the land contains one or two single family residences

If you’re looking for a simpler solution to calculating your taxes owing, however, I would suggest this Land Transfer Tax in Ontario calculator.

DOWN PAYMENT

For all of you fellow Canadians, the minimum downpayment on a home in Canada is 5%. However, if you’d like to avoid paying CMHC (mortgage insurance) you may want to consider saving up to put 20% or higher down. A larger down payment will also save you money on interest long term. That being said, there is an argument to be made for taking on a higher mortgage loan in order to start building equity sooner but we won't get into that at the moment.

LAWYER FEES

In order to complete the paperwork and close the sale, you’ll need to hire a lawyer. Budget approximately $700-$1500 for legal fees and another $400-$500 for disbursements. For anyone unfamiliar with the term, disbursements are any expenses your lawyer pays for on your behalf, such as, title insurance.

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CARRYING COSTS

MORTGAGE

The number one expense that buyers DO factor in, however, worth mentioning nonetheless. If you’re still in the process of shopping around and haven’t yet spoken with a mortgage broker, CIBC offers a handy selection of online mortgage calculators that I, personally, like using to assist in determining your hypothetical payments and affordability. This should make your life a bit easier when drafting up a budget.

UTILITIES

Hydro, water, heating... all services that you will require in order to maintain the day-to-day function of your household. While your utilities may fluctuate with the seasons, budgeting a couple hundred dollars a month will guarantee you’re prepared when the bills start coming in. Prior to purchasing a home, you can always request a copy of the Sellers utility bills in order to approximate average monthly spending.

HOME INSURANCE

Most lenders will require that you have home insurance to protect the property they are lending on. Premiums will vary from property to property depending on factors such as location, proximity to water, replacement cost, occupancy, etc. Make sure to shop it around and receive multiple quotes before choosing an insurance company! Use caution, however, when doing so. Not all insurance policies are created equally. Have your Insurance Broker explain to you the different options available and how they may be applicable to you. While you want to ensure your rate is competitive, the cheapest policy is not always the best option. You always want to make sure you are insured property. Better safe than sorry!

MAINTENANCE

Your home will need maintenance regularly AND sometimes unexpectedly. You’ll be on the hook when it comes to a new roof, lawn maintenance, snow removal and all other maintenance expenses. Budgeting approximately 1-3% of your home’s value per year for maintenance costs is always a good rule of thumb to follow.

PROPERTY TAXES

Depending on your municipality, tax rates will vary and become due once a year. Generally, property taxes will range from about 0.5-2.5% of your property value assessment, however, I would suggest researching the tax rate in your municipality. For anyone purchasing in Barrie, residential taxes are 1% multiplied by your property’s assessed value. For more information, you can visit the Barrie’s 2019 Tax Rates and Fees.

CONDO FEES (IF APPLICABLE)

If you’re considering a condo, don’t forget to factor in condo fees! Generally, condo fees will pay into the condo associations “reserve fund” and go towards maintaining the building and common areas. Be cautious of older buildings! The TLC needed could be an indication of rising, if not high condo fees.

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