Buying a home involves more than saving for the down payment and qualifying for a mortgage. There are several other upfront and ongoing expenses to plan for, and some can add up to thousands of dollars.
If you're considering buying a home in Burlington, Oakville, Hamilton or elsewhere in Ontario, understanding these costs ahead of time can help you set a realistic budget and avoid surprises before closing.
1. Your Down Payment
Your down payment will usually be the largest amount of cash you need when purchasing a home.
The minimum down payment required in Canada depends on the purchase price and the type of mortgage you're getting. Buyers putting less than 20% down will generally require mortgage default insurance, which adds an additional cost to the mortgage.
It's also important not to put every available dollar toward the down payment. You'll want to leave room in your budget for closing costs, moving expenses and the costs that often come with settling into a new home.
2. Your Deposit
The deposit is submitted with or shortly after an accepted Agreement of Purchase and Sale and forms part of your total down payment.
In markets such as Burlington and Oakville, the size and timing of a deposit can also be an important part of an offer. Your Realtor can help you determine an appropriate deposit based on the property and circumstances of the offer.
3. Ontario Land Transfer Tax
Most Ontario home buyers pay land transfer tax when they purchase a property. The amount is calculated based on the purchase price and is typically one of the largest closing costs.
For example, the Ontario land transfer tax on a $1,000,000 home is approximately $16,475 before any applicable rebates.
Eligible first-time home buyers may qualify for a land transfer tax refund, which can reduce this expense.
It's a good idea to calculate your estimated land transfer tax before you begin making offers so you have a better understanding of the cash you'll need at closing.
4. Legal Fees and Disbursements
A real estate lawyer handles the legal side of the transaction, including reviewing documents, conducting title searches, registering the property in your name and arranging the transfer of funds.
As a general estimate, buyers might expect to spend approximately $1,500 to $2,500 on legal fees and disbursements, although the actual cost will vary depending on the lawyer and complexity of the transaction.
5. Home Inspection
Depending on the property and conditions of your offer, you may choose to have a professional home inspection completed.
An inspection can help identify potential concerns with major components of a home, such as the roof, electrical system, plumbing, heating and cooling systems, foundation and visible structural elements.
For older homes, which are common in established neighbourhoods throughout Burlington, Oakville and Hamilton, an inspection can be particularly valuable.
6. Adjustments on Closing
Buyers are sometimes surprised by adjustments on their Statement of Adjustments.
For example, if the seller has already paid property taxes or certain other expenses beyond the closing date, you may need to reimburse them for your portion.
These aren't necessarily large expenses, but they're another reason to have some additional cash available at closing.
7. Moving and Immediate Home Expenses
Once you get the keys, there are usually a few more expenses to consider.
Moving costs, utility setup, home insurance and changing locks are common examples. You may also need furniture, window coverings, appliances or minor repairs shortly after moving in.
For condo buyers, there can be additional considerations such as monthly condo fees, parking or locker costs and move-in procedures or fees depending on the building.
What About Ongoing Homeownership Costs?
Your budget shouldn't stop at closing day.
In addition to your mortgage payment, consider ongoing expenses such as property taxes, home insurance, utilities and regular maintenance. Freehold homeowners should also plan for larger expenses that arise periodically, such as replacing a roof, furnace, air conditioner or other major components.
Condo owners will generally have fewer exterior maintenance responsibilities, but they'll need to factor monthly condo fees into their budget.
How Much Should You Budget for Closing Costs?
As a general guideline, Ontario buyers should consider budgeting approximately 2% to 4% of the purchase price for closing costs, in addition to their down payment.
The actual amount will depend on the purchase price, land transfer tax, legal fees, closing adjustments and whether you qualify for any first-time home buyer rebates.
For example, on a $1,000,000 home in Ontario, provincial land transfer tax alone is approximately $16,475 before any applicable first-time buyer rebate. Once you add legal fees, a home inspection, closing adjustments and other expenses, the total can climb quickly.
Rather than relying on a percentage alone, it's a good idea to estimate your closing costs based on the price range you're considering. This gives you a much clearer picture of the total cash you'll need to close, not just your down payment.
The Maguire Team can help you understand the costs associated with your purchase so you can budget confidently before you start making offers.
Planning to Buy in Burlington, Oakville or Hamilton?
A good home search starts with understanding what you can comfortably afford and what the entire purchase will cost.
The Maguire Team can help you look beyond the listing price and understand the costs, property considerations and neighbourhood differences that may affect your purchase.
If you're thinking about buying a home in Burlington, Oakville, Hamilton or the surrounding area, reach out to The Maguire Team. We'll help you put together a realistic plan for your home search and understand what you'll need financially before you start making offers.
Comments:
Post Your Comment: