We Do the Homework: How Much House Can We Afford?

ADDITIONAL COSTS WHEN BUYING A HOME: "CLOSING COSTS"

The items below pretty well cover closing costs that are in addition to the price you will pay for your home. These additional expenses can often be overlooked, but are typical costs and do need to be factored into your budget.

PROFESSIONAL HOME INSPECTION

This would usually be for a freehold house, and costs $300+++. The cost depends very much on the inspection company used and the size of the home being inspected.

DEPOSIT

The deposit is an act of good faith by the buyer as a show of good faith that the buyer's offer to Purchase is a good one, and that the transaction will be upheld. This amount is usually between 5% and 10% of the offering price. It is generally given to the listing brokerage within 24 hours of acceptance of an Offer, and is held in the Listing Brokerage's Deposit Trust Account pending closing. It does form part of the down payment. In cases where there is more than one offer, Buyers will sometimes give the deposit cheque with their Offer as an enhancement. These funds need to be readily accessible. The cheque is usually certified, or can be a bank draft.

TITLE INSURANCE

When there is no up-to-date survey there are a variety of insurers that provide Title Insurance, including the Buyer's lawyer. Depending on the value of the property,Title Insurance costs $300 and $500. A note of caution. Title Insurance cannot change any defects in the description of the land, but rather will compensate the Buyer as a result of negative impact resulting from a title defect.

LAND TRANSFER TAX

Purchasers of real estate in Toronto are required to pay not only provincial Land Transfer Tax on closing, but also municipal Land Transfer Tax. Click here for the a really excellent site that will do the math for you. First time buyers are eligible for a refund if they or their spouses have not owned a home anywhere in the world. It appears that the total refund does not exceed $2000, and must be applied for within 18 months of the home being registered. Click here for more info on the refund.

SURVEY

A survey shows the land involved in any transaction, and also any improvements, such as sheds, garages, decks etc. A bank or lender may require one as part of the Appraisal for a mortgage. In the event the Seller doesn't have one, (An up to date survey is not an unusual request in any Offer, but if there isn't one, it may be up to the Buyer to have a new one made by an Ontario Land Surveyor. Your lawyer may not give an unqualified opinion of title without an up-to-date survey. A survey usually costs in the region of $1,000.

LEGAL FEES

An Ontario real estate lawyer will act on your behalf to close your house purchase. The fee will be for services, including title searching, and for any expenses incurred. In general, the amount will be in excess of $1500, but may be more if there are complex issues to deal with. Be sure to ask a prospective lawyer for a complete breakdown of fees, disbursements, and any additional mortgage work.

DISBURSEMENTS

Expenses your lawyer could incur on your behalf could be in the region of $500 to $1,000 depending on the complexity of the transaction. They can include anything from zoning clearance and work orders, registering of the deed and mortgages, to photocopiers and couriers.

STATEMENT OF ADJUSTMENT

In addition to the balance of the purchase price being paid: property taxes...the yearly amount is divided by 365, and if the Seller has paid the total amount, the buyer has to pay their share, however many days of the year are left between closing and December 31st. The day of closing is apportioned to the Buyer. Utilities – The meters for any utilities will be read on closing, including natural gas and hydro, and the seller will pay for utilities used up to the day of closing. There are many additional adjustments in the purchase of a new home, including the Ontario New Home Warranty Fee.

HOME INSURANCE

Call for quotes. But usually a minimum of $600+++ depending on the value of your home.

MOVING COSTS

Joe Moves You? Two Men With a Truck? Pickfords? Do you pack yourselves? does the moving company do it for you? Do you use boxes from the LCBO, or proper moving boxes? As you can see there are lots of variables.

FIRST MORTGAGE COSTS

Because most mortgage companies use the 1st or the 15th of the month as a payment date, if the purchase of your new home closes at the beginning of the month, for instance, September 9th, the mortgage company will deduct from the mortgage monies interest from date of closing (9th) to the 1st October – interest adjustment date – and your first payment will then commence the 1st November and continue on a monthly basis thereafter. The current preferred rate for a five year fixed mortgage is 2.99% and on a $100,000 mortgage, the portion of the monthly payment would be $247.63: roughly $8.00 per day. From the 9th to the 1st of the following month, the interest would be $176.00. This would leave a balance of $99,824 in mortgage monies payable to you. It usually costs about $300 for an appraisal and loan processing. High ratio mortgages cost more.. A high ratio mortgage is one in which the purchase is putting a down payment of less than 20%.

SECOND MORTGAGE COSTS

Hopefully you won't need one as the interest rates are considerably higher. There will be associated additional legal fees, appraisal and brokerage fees.

HST

Re-sales –no HST on the actual purchase, but all other services provided (lawyer to moving company etc) will be subject to HST There are a number of real estate purchases that will be subject to HST. These include:

• Substantially renovated homes – when purchased from the builder/renovator.

• Commercial properties – Brand new homes: usually HST is included in the purchase price but it is there.

• Vacant land – depending on its use. All of the above where HST is possibly included will require you to seek advice from your accountant.

THE DAY OF CLOSING

Your lawyer has to have the money from the mortgage company on the day of closing. Your lawyer will be in touch with you earlier in the week before to closing to arrange an appointment to sign and bring in the balance of the purchase price. This usually happens one or two days before closing.

INSTANCES WHERE IT MAY BE DIFFICULT OR COSTLY TO OBTAIN HOME INSURANCE:

If any of the following are possibly present(and the listing agent should disclose) then it would be smart to make your purchase conditional on making sure that it is possible for you to obtain insurance.

1. Aluminum/Knob and Tube wiring - old forms of wiring that have a greater chance of causing a fire. Generally an insurance company will give a grace period for the purchaser to have the wiring replaced. This is not cheap, as in addition to replacing the wiring, a contractor then has to come in to repair the holes in the walls! Rough estimate is $8,000. New wiring has to be checked by a local Hydro company.

2. Hydro Service - 60 amp hydro service may have to be increased to at least 100-amp service before insurance can be obtained.

3. Oil Tanks - insuring a home with an oil tank (in particular one that is over 25 years old) is increasingly difficult unless the tank has been inspected by a Technical Standards and Safety Association (TSSA) technician. Also oil companies will no longer provide fuel oil to homes with tanks that have not been certified. Tanks that are underground are subject to strict regulation and in most cases must be removed.

4. Galvanized Steel Plumbing - gets rusty over the years with joins deteriorating and the risk of flooding, burst pipes increasing. 5.Insulbrick on the exterior of a house increases the risk of fire, and also rotting of a wood frame. 6.Vacant properties can also cause concern: vandals, squatters, unnoticed damage. it is up to the seller to ensure that his insurance company has been informed.