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My Mortgage Blog

Buying your very first home is exciting and can also be a little frightening when you think about the magnitude of the investment you are making. Knowing how much you can borrow by getting a mortgage pre-approval and being aware of the other costs you'll incur can take some of the worry out of it. Financial planners, mortgage brokers and anyone who has been through it will tell you that taking the time to do a little bit of budgeting before you start shopping for a mortgage will ensure that you don't get yourself into a sticky financial situation at closing time or after. 

There are many other costs on top of the house price which you may not be aware of but should consider when budgeting for your new home. Some of them are recurring carrying costs of owning a home and others are one-time costs related to the closing of the sale. In this article, we talk about the closing costs that you should expect to have to pay before and at the time you take possession of your new home

Legal Fees 

Completing the sale of a home is a complicated legal process. This is especially true when a mortgage lender is involved. Therefore you will need a lawyer to help prepare the paperwork needed to transfer the property deed to your name and to complete a title search on the property. A title search involves looking through past ownership records of the home to uncover liens, mortgages or other claims on the ownership that may still exist. Legal fees will vary depending on the lawyer you choose, however you can expect legal fees to add two to three thousand dollars to your home buying cost. 

Land Transfer Tax

In Ontario, a land transfer tax is applied to all home purchases. The buyer always pays the land transfer tax, and you must pay it in full at the time of the closing. Land transfer tax cannot be added to the amount of your mortgage, and there is no option to pay it in installments. The amount of land transfer tax applicable to your home depends on the selling price, however, it typically ends up being between 1 - 1.5% of the sale price. In Toronto, the city charges a matching amount as a municipal land transfer tax. First-time buyers may be eligible for a rebate of the land transfer tax, but you will have to pay it and apply for a rebate later. 

Home Inspection

Home inspections are sometimes required by mortgage lenders before the final approval of the mortgage. Even if not, an inspection by a qualified home inspector is a good idea to prevent repair costs that you may not have anticipated. Home inspections generally cost between $400-$700 and are well worth the extra expense. 

Downpayment

It goes without saying that you'll need a down payment before the purchase of your home can be completed. Do the math in advance of purchasing your home to determine how much money you can and should put down. In a previous blog we talked about how the amount of your down payment can affect the cost of your mortgage and even your ability to get approved. Whatever you decide, you'll need to have this money available at the time of closing. 

Factor all of these closing costs into your budgeting before you take the plunge into buying a home. Stay tuned for a future article about carrying costs, to help you understand how affordable your new home will be. Talk to a mortgage broker for help with your budget and in getting a mortgage pre-approval so you can begin the search for your new home!