4 March 2011
Another important thing to remember is that mortgage lenders will require you to meet certain expectations before they will lend you the money. They advance only certain per cent of either the appraised market value of a home, or the home’s purchase price. It’s obvious that the lender will choose the lesser of the two. Sometimes a professionally performed appraisal may be required. It often happens so that a buyer has to pay this appraisal fee of about $300-$500. Some lenders may charge a financing fee – it depends on your credit record.
Moreover, the lender will expect you to pay the property insurance, beginning on the day of closing. It may cost approximately $700-$900/year.
You may also be asked to get an up-to-date survey before finalizing the mortgage. Fortunately, the seller often pays for it. The cost of land surveys varies from $1000 to $2000.
In case you want to get a high-ratio mortgage (with less than 20% down payment) you’ll have to pay for mortgage insurance. According to the CMHC, the rates are charged at 1.00%-2.75% of the total mortgage sum. Usually, you can include it into your mortgage, but you should pay 8% tax on the insurance premium.
Another additional payment is the title insurance which protects you from title defects, errors or omissions. It can also protect you from undisclosed heirs who may to claim your property. The cost depends on the type and price of your property, but, usually, is about $300.
It should be noted that in some provinces new home warranties are mandatory (e.g. Ontario, British Columbia, and Quebec). It protects your investment from construction defects and applies only to new constructions. This service can cost a few hundred dollars and is a one-time fee.
One should also be ready to pay land transfer tax in case the property changes owners. The tax, ranging from 0,5% to 2% is paid by the buyer. If you are buying a house in Toronto you may face Toronto Land Transfer Tax. You can check the proper amount on www.mortgagelegko.com in the Calculators section.
The Harmonized Sales Tax (HST) is in effect in certain Canadian provinces. In Ontario, for instance, HST is 13%. It concerns some types of agreement: the purchase and sale agreements for new homes. So it doesn’t apply to resale agreements. HST is added to lawyer’s fees, moving costs, home inspections, home staging etc.
You’ll also have to pay your lawyer. The lawyer’s duties include: a title search, mortgage registration and preparation, and of course the title deed. Legal fees may range from $500 to $1000 plus disbursements (e.g. registration fee, wire transfers, couriers)
It can also happen so that you’ll have to compensate the previous owner for utilities or taxes if they were paid beyond the closing date. These adjustments include hydro, water and property taxes.
And the last, but not the least – the moving costs. They depend on your preferences: whether you want your belongings to be packed or just moved.