It’s a very good idea to understand how much you can afford before you start looking at homes.
Buying a home involves more than just the down payment. While this might be your largest cost, there are other things you’ll need to budget for.
Here’s a quick look at costs associated with buying a home.
The amount that you include with your offer to purchase a home. Deposits are held in trust and deducted from your purchase price and considered part of your down payment.
- Down payment
The money you put down upfront. The minimum amount that you can put down is 5% of the purchase price. Ideally, you should put down at least 20% to avoid mortgage insurance which is an incremental insurance that is required if you put down less than 20%.
- Land transfer tax
This is a one-time tax that you pay on closing a new house. The amount is dependent on the purchase price and location of your home. Homes in Toronto have the most expensive land transfer tax, as you’re paying an additional tax to the city of Toronto.
- Appraisal fee
Your lender will likely require an appraisal on the home you are purchasing. The purpose of the appraisal is to ensure that the home is worth the price you’re offering. The cost of an appraisal is typically between $250 -$350.
- Home Inspection
The purpose of the home inspection is to verify the condition of the home. It will cost you anywhere between $300 – $500.
- Property Insurance
Payments to protect you from unexpected or accidental damages to your home. Your lender will require you to have insurance in place on closing day.
- Mortgage Life Insurance
An insurance policy that will pay your mortgage in the event that something happens to you and you are no longer able to pay your mortgage.
- Legal Fees
These are paid to your lawyer on closing and range in price from $800 to $1500 depending on your situation and which lawyer you select.
- Title Insurance
Your lawyer will likely recommend this. It insures you against any defects to the title of the home. Many lawyers will include the title insurance in their fees.
- Real Estate Fees
There are no real estate fees on purchasing a home. The seller pays the fees.
- Moving Expenses and connection fees
These will very depending on the distance of your move and location of your home.
- Ongoing Costs
Ensure that you also allocate a small fund for ongoing maintenance of your home and unexpected repairs.