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Brian Madigan LL.B., Broker
BRMadigan@Rogers.com

RE/MAX West Realty Inc.,
Brokerage
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 


Phone: 416-745-2300

Cell: 647-404-8150 
Toll Free: 1-888-507-0817

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RECO Toolkit #6

January 8, 2019 - Updated: January 8, 2019

RECO’s Toolkit #6  How to Budget for Buying a Home
 

What follows is a series dealing with some publications by RECO to help the Consumer:

 

Real Estate Council of Ontario
 

When you’re looking to buy a home, it’s easy to forget that the purchase price is just one of many costs associated with ownership. These costs can add up and take an unexpected chunk out of your budget. So it’s important to understand the full cost of buying a property.

 

pre-closing costs

Home inspection

Getting a home inspection is a smart decision, because a qualified home inspector can identify underlying problems with a home’s major systems, like heating and electrical. To find a qualified home inspector speak to your real estate representative or check the websites of various home inspector associations.
 

Appraisal and/or survey

Your lender (e.g., a bank) may require an appraisal or survey of the property you want to buy before they agree to provide financing. This is to double check that the value of the home or property matches its sales price.
 

closing costs

Land transfer tax

In Ontario, a land transfer tax of up to 2 per cent of the purchase price applies. In Toronto, an additional tax applies, also up to 2 per cent. First-time homebuyers are eligible for a refund of the tax. Talk to your real estate representative about your eligibility.
 

Mortgage insurance

If the down payment on your home is less than 20 per cent of its sales price, you will be required to buy mortgage insurance. Rates depend on how much you are borrowing. For more information, visit www.cmhc-schl.gc.ca.
 

Legal fees

There are a number of legal documents and contracts involved in the purchase of a home. Your lawyer will do a title search on the home to ensure the seller can actually sell the property and that there are no liens against it. They will also register the deed and mortgage for you. Find an Ontario lawyer by visiting the Law Society of Upper Canada www.lsuc.on.ca.
 

Title insurance

Title insurance protects you against title fraud, errors in public surveys, encroachment issues with neighbours and more. Speak to your lawyer during the closing period for more details.
 

Adjustments

Adjustments are costs that the seller pre-paid but which you now owe because you’re the one who’s going to be living in the home (e.g., property taxes, maintenance fees, rental fees for hot water heaters). You will need to refund the seller for these.
 

Home insurance

You must have insurance on your home before lenders will release the funds for the sale to close.
 

Harmonized Sales Tax (HST)

Newly-constructed homes are subject to HST of 13 per cent, although buyers may be eligible for rebates from both the Ontario and Federal governments. HST does not apply to resale homes.
 

Tarion new home warranty program

In Ontario, new homes are covered by a warranty program, administered by Tarion. The warranty protects new home buyers against various issues that may emerge, including structural defects in the home. It also offers deposit protection to buyers of new homes. Sometimes the Tarion enrollment fee is included in the purchase price and other times it is due at closing. For more information, visit www.tarion.com.
 

AFTER-closing costs

Moving costs

Moving costs vary widely based on how much stuff you have, how far you’ll be moving, and whether you’ll hire a professional mover or rent a truck and move yourself.
 

Utility and service hook-ups

Some gas, hydro, water and telecommunications companies charge a hook-up fee.
 

Renovations and repairs

If you want to make major renovations after move-in, it can add significantly to your costs. A home inspection or disclosure from the seller may also identify repairs that are needed.
 

Appliances, furniture and decorations

Once you’re in your new space, there’s a good chance you’ll want fresh décor to make it your own.
 

looking for more information?

For more information on how RECO protects the public’s interest, please visit www.reco.on.ca or call 1-800-245-6910.
 

 

Brian Madigan’s Annotated RECO Publication Toolkit #6 How to Budget for Buying a Home
 

I have altered the presentation, but not changed any words, added italics and highlighting, as well as some “notes”.
 

Real Estate Council of Ontario
 

When you’re looking to buy a home, it’s easy to forget that the purchase price is just one of many costs associated with ownership. These costs can add up and take an unexpected chunk out of your budget. So it’s important to understand the full cost of buying a property.
 

Note: there are a number of additional expenses, and it’s best to have some idea what they will cost.
 

pre-closing costs
 

Home inspection
 

Getting a home inspection is a smart decision, because a qualified home inspector can identify underlying problems with a home’s major systems, like heating and electrical. To find a qualified home inspector speak to your real estate representative or check the websites of various home inspector associations.
 

Note: this will cost something in the range of $500.00 for a 3 to 4 hour inspection, by someone who is qualified and insured.
 

Appraisal and/or survey
 

Your lender (e.g., a bank) may require an appraisal or survey of the property you want to buy before they agree to provide financing. This is to double check that the value of the home or property matches its sales price.
 

Note: this can range from $300.00 to $800.00, it’s best to find out ahead of time, however, the mortgagee will likely have their own. It may be included in the cost for the first mortgage, but certainly not secondary financing.
 

closing costs
 

Land transfer tax
 

In Ontario, a land transfer tax of up to 2 per cent of the purchase price applies. In Toronto, an additional tax applies, also up to 2 per cent.
 

First-time homebuyers are eligible for a refund of the tax. Talk to your real estate representative about your eligibility.
 

Note: just outside of Toronto, there is only one Land Transfer Tax, so if you are close to the border, you should be aware of this. While the second Toronto tax is a one-time expense, the annual municipal taxes in Toronto are usually much lower. Year 8 is often the break-even year.
 

Mortgage insurance
 

If the down payment on your home is less than 20 per cent of its sales price, you will be required to buy mortgage insurance. Rates depend on how much you are borrowing. For more information, visit www.cmhc-schl.gc.ca.
 

Note: Genworth also offers mortgage insurance. In addition, there is life insurance upon the mortgage principal. That’s really a term life insurance policy. Sometimes, well worth the additional costs.
 

Legal fees
 

There are a number of legal documents and contracts involved in the purchase of a home. Your lawyer will do a title search on the home to ensure the seller can actually sell the property and that there are no liens against it. They will also register the deed and mortgage for you. Find an Ontario lawyer by visiting the Law Society of Upper Canada www.lsuc.on.ca.
 

Note: This is now the Law Society of Ontario.Rates are quite competitive. Title insurance is an additional expense.
 

Title insurance
 

Title insurance protects you against title fraud, errors in public surveys, encroachment issues with neighbours and more. Speak to your lawyer during the closing period for more details.
 

Note: Just about 100% of the time, this is highly recommended. Still, it doesn’t replace a Survey of the Property. An older one may be sufficient, however, the costs of a new one can run $1,700.00.
 

Adjustments
 

Adjustments are costs that the seller pre-paid but which you now owe because you’re the one who’s going to be living in the home (e.g., property taxes, maintenance fees, rental fees for hot water heaters). You will need to refund the seller for these.
 

Note: if this property is newly built, there are often substantial additional costs which are removed from the purchase price in order to make the property appear more financially attractive and then added back as an adjustment on closing. Have someone, either your lawyer or your real estate agent determine what they are.
 

Home insurance
 

You must have insurance on your home before lenders will release the funds for the sale to close.
 

Note: make sure the property is in fact insurable. Your insurance broker can search the insurance claims history for the property. This search should be undertaken during your due diligence period not left to the day or two before closing.
 

Harmonized Sales Tax (HST)
 

Newly-constructed homes are subject to HST of 13 per cent, although buyers may be eligible for rebates from both the Ontario and Federal governments. HST does not apply to resale homes.
 

Note: HST does apply to commercial properties, so a resale home might be subject to HST in whole or in part. It would be wise to register under the HST program to ensure that payment is not required on closing. Check with your accountant or lawyer on this point. There are two rebates one for properties which are to be owner-occupied and the other for investment properties. This can become complicated, particularly with Assignment purchases. Be careful to secure advice ahead of time.
 

Tarion new home warranty program
 

In Ontario, new homes are covered by a warranty program, administered by Tarion. The warranty protects new home buyers against various issues that may emerge, including structural defects in the home.
 

It also offers deposit protection to buyers of new homes. Sometimes the Tarion enrollment fee is included in the purchase price and other times it is due at closing. For more information, visit www.tarion.com.
 

Note: this is one of those costs which can be removed from the purchase price and then added to the adjustments.
 

AFTER-closing costs
 

Moving costs
 

Moving costs vary widely based on how much stuff you have, how far you’ll be moving, and whether you’ll hire a professional mover or rent a truck and move yourself.
 

Note: Secure a quotation in advance. Deal with the issue of “overtime” when you hire the movers. Check their references, CAREFULLY.
 

Utility and service hook-ups
 

Some gas, hydro, water and telecommunications companies charge a hook-up fee.
 

                   Note: easily, this can run into a few hundred dollars each.
 

Renovations and repairs
 

If you want to make major renovations after move-in, it can add significantly to your costs. A home inspection or disclosure from the seller may also identify repairs that are needed.
 

Note: if you have these in mind and they are substantial, they may be added to your first mortgage. Inquire from your mortgage broker, if you require additional funds. It’s probably easier to renovate before you move in, than afterwards.
 

Appliances, furniture and decorations
 

Once you’re in your new space, there’s a good chance you’ll want fresh décor to make it your own.
 

Note: you can probably wait on the furniture, but the appliances, you are going to need right away. Frequently, older appliances break down with higher usage and demand from a new family, so you should also budget for replacements.
 

looking for more information?
 

For more information on how RECO protects the public’s interest, please visit www.reco.on.ca or call 1-800-245-6910.

 

COMMENT
 

Here’s the link to the RECO website for a “PDF”:
 

http://www.reco.on.ca/wp-content/uploads/RECO-How-to-budget-for-buying-a-home.pdf

 

 

If you would like some additional information about any of the issues raised here, then please give me a call.

 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com


Tagged with: reco toolkit budget for buying
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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

Phone: 416-745-2300

BRMadigan@Rogers.com

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