Buying a house can be an exciting, but at the same time stressful and overwhelming experience. Even though you might assume you pay everything up front, there are some hidden fees when buying a house in Canada.
These fees could make or break your budget, so it is important to know about them before making an offer on a property. Let’s check some of the most common ones together!
1. Land Transfer Tax
Are you wondering what expenses are involved in buying a house? One of the costs associated with home ownership is a land transfer tax. The latter is a government fee that you need to pay once you buy a home. The cost that you need to pay may differ based on your location and the value of your property. Most provinces charge fees ranging from 0.5% to 2.5% of the cost of your home. For instance, in Ontario, you must pay 0.5% land transfer tax on properties valued at more than $55,000.
2. Mortgage Down Payment
There are many hidden expenses when buying a house, one of which refers to the down payment. Mortgage down payments are the certain amount of money you have to put down, and this amount is typically expressed as a percentage of the total cost. The lowest down payment required in Canada is 5%, and it can go as high as 20%. When your down payment is high, you will make lower monthly payments.
3. Home Appraisal Fee
Another hidden cost of home ownership can be the home appraisal fee that your lender will require. This fee is essential to ensure that you are financially stable enough for covering all the monthly homeownership costs. Your lender will be able to see that you have enough income for a certain home.
Banks, mortgage lenders, and other financial organizations require home appraisals, which are crucial steps in the buying process. They help to prevent overpayment for your house. Depending on where you are located, the cost of an appraisal might range anywhere from $300 to $500.
Additionally, through a home appraisal, you can understand how much the property’s worth is and the state of its condition which may help a lender ensure that you get a good deal. This appraisal fee shows lenders that you are capable of repaying any loans when something happens or when you need to make unexpected home repairs.
4. Mortgage Life Insurance
Another cost to consider when buying a house is mortgage life insurance. This is an important type of insurance when people need to help their family members pay off their mortgages once they pass away.
You can get mortgage life insurance by talking with your bank or credit union about a policy that will work for you. Most banks offer different types of mortgage life insurance, so it’s important to ask questions and make sure that the policy meets your needs before signing up for it.
5. Home Inspection Fee
A home inspection is a crucial component of acquiring a property, especially if it’s your first home. An expert inspector will tour the home with you while assessing its plumbing, heating, electrical, structural systems, and more.
A qualified inspector will let you know about any problems that can influence your decision to buy a home. Once they asses your home, the findings and home issues will be proof for you to negotiate with a seller for lower costs and repairs.
6. Mortgage Default Insurance / CMHC Insurance
Mortgage default insurance, which is required by law, defends lenders in the event that a borrower stops making mortgage payments. The Canadian Mortgage and Housing Corporation (CMHC) offers this type of loan protection for all mortgages, requiring less than a 20% down payment. Mortgage default insurance will need to be purchased if you are unable to pay the required down payment. When you cease making your mortgage payments, it helps to safeguard the financial institution from loss.
7. Repair and Renovation Costs
You know that home inspection is essential for discovering any home problems or potential issues that will definitely become a major threat later on. This way you become aware of all the mandatory renovations and repairs that are a must for your comfort.
But, many homeowners don’t realize that repairs and renovations can cost more than they expect. They may have heard about this possibility but don’t really understand what it means for them personally until after they’ve already bought their home and started making those repairs. The truth is that this can happen to anyone, even if they’ve lived in their house for years and never had any major problems before.
8. Legal Fees
Other fees when buying a house are legal ones. Your contract will typically be reviewed by a lawyer to ensure that you are receiving a fair deal. Depending on the region and type of agreement, a lawyer’s fee can change.
You will want to pay a lawyer to help handle any paperwork and documents, review contracts, and guide you throughout the buying process.
9. Sales Tax
Other expenses when buying a house include sales tax. In Canada, the sales tax is called the Harmonized Sales Tax (HST) which is a combination of two other taxes:
- The 5% Provincial Sales Tax (PST)
- The 5% Goods and Services Tax (GST).
The total amount of tax on residential property is typically around 15%.
10. Moving Costs
When buying a house, you may forget that moving costs will probably be the most expensive part of the process. Moving costs are not included in the purchase price of your house. Hiring a professional mover to help you transfer anything you want to your new house will be a wise decision. You can use the Real Estream app to find a handyman who can deliver your belongings to wherever you want.
It’s important to know what you will be paying for when you buy a house. There are many unexpected expenditures that you need to be aware of to prevent stress and overwhelming situations. Check our list and opt for our app to find local contractors to help you with any real estate issue!