First Time Home Buyer? Here are the Expenses you Need to be Aware of

As a first-time home buyer, you will want to prepare for all the expenses associated with purchasing a home. While you may be eligible for a few deductions or tax credits along the way, it's important to note that purchasing a home involves planning with the help of your Realtor and Financial Institution.

If you're preparing to purchase your first home congratulations! It's an accomplishment you should be incredibly proud of. However, to ensure that the process runs smoothly and is positive, we want to ensure you're aware of all the fees before you begin the process. 

So, here are the expenses that a first-time home buyer can expect to pay during the process in Ontario:

1. Down Payment

The down payment for your home will be one of the largest expenses you have during the home-buying process. Unlike other expenses that can be paid during the closing process or on the closing day, your downpayment is an expense you must be ready to pay within 24 hours of signing the Agreement of Purchase and Sale. 

Typically you will be required to put 20% of the purchase price for a down payment for a conventional mortgage.

2. Mortgage Loan Insurance

If your down payment is less than 20% of your home purchase price, you will be required to have Mortgage Loan Insurance. This insurance protects your lender from any financial loss should you default on your mortgage. 

3. Land Transfer Tax

As a home buyer in Ontario, you are required to pay a provincial land transfer tax due on the closing date. Luckily, as a first-time home buyer, you will be eligible to receive a tax credit or rebate of up to $4,000. This means that any home purchased below $368,333 will have the land transfer tax covered in the rebate. 

If you're buying in Toronto, you will also have to pay an additional tax, the municipal land transfer tax, known as the MLTT. However, first-time home buyers are also eligible for a rebate. Your tax rebate for this is up to $4,475.

For those purchasing a home over the price of $368,333, your Ontario land transfer tax is calculated as follows:

1. The first $55,000 is 0.5%. 
2. Amounts over $55,000, up to $250,000: 1%
3. Amounts over $250,000, up to $400,000: 1.5%
4. Amounts over $400,000, up to $2,000,000: 2%
5. Anything over $2,000,000 will have to pay 2.5%

4. Legal Fees

At the time of closing, you will be responsible for paying what is known as your "closing costs." This refers to a few of the expenses listed above and your legal fees. Throughout the process of purchasing your home, your lawyer will perform several services, including purchasing title insurance, registering the transfer of the property, and registering the mortgage.

Legal fees are subject to the services the lawyer has to provide during the process. Ask your lawyer for a quote or an estimate upfront to ensure you are prepared for this cost during closing. This will help you to have a good understanding of how much you should have prepared to pay on your closing day.

5. Additional Costs

The above fees are costs required during the home-buying process. However, there are a few instances in which you will have to pay additional fees. For example, if you are purchasing a brand new home, you will also need to pay 13% HST on top of the purchase price.

Suppose you are purchasing a condo or apartment. In that case, you will also want your lawyer to look over the status certificate, which indicates the health of the finances of that particular condo board. Having your lawyer look over the status ahead of putting in an offer will also be an additional cost ranging from $150 to $300.

Lastly, whether you're purchasing a home or a condo, you may want someone to come in and perform a home inspection. This will also be an additional fee that will need to be paid upfront.

It typically ranges from $400-$700 depending on the size of the home.

As you can see, quite a few additional expenses are required during home-buying. Though this breakdown provides a great overview of the fees and expenses associated with buying a home, we recommend that you sit down with your realtor to better understand how much you should have saved and ready.

If you're ready to begin the home-buying process, we can help. Feel free to download our home buyer's guide for additional information, or contact us today for a free consultation.