The terms below are costs that apply to mortgage and property purchase transactions. Note that not all costs apply in all circumstances, but are listed here for your information.
During the start of the home purchasing process:
Appraisal
Most lenders will require an appraisal of the property to support the lending value of the property. Fees are higher for revenue properties or more complex purchases. Commercial appraisals are significantly more expensive and more time-consuming to prepare given the complexity of the appraisal required.
Property Inspection
An inspection is a thorough evaluation of the structure, systems, and components of a home. The inspection report is usually multi-paged, and comments on the condition of, but not limited to: foundations, electrical, plumbing, heating, water heaters, appliances, fireplaces, drainage, roof, walls, floors, attic, crawl spaces, patios, etc. The inspection is usually performed a day or two before the market value is determined by the property appraisal. An inspection can cost anywhere between $300-$500 but the cost is well worth identifying any major cost repairs required.
At the Notary or Lawyer which takes place closer to your completion date:
Property Transfer Tax
This is a provincial tax charged every time a property changes hands. The cost is 1% on the 1st $200,000 of value, 2% of the value greater than $200,000, up to $2,000,000 and 3% of the value greater than $2,000,000. If you are a first-time homebuyer, there is a program to provide full or partial relief from this tax under specific conditions.
Re-sale property (already lived in)
If the purchase price is $835,000 or less and it will be your primary residence, you’re exempt from property transfer tax on the first $500,000 of the purchase price of the property. There’s a partial exemption for homes priced under $860,000. Use this LINK to determine your cost and remember to tick the two boxes (first time home buyer, citizen of Canada)
Pre-Sale property (bought from developer)
If the purchase price is $1,100,000 or less, you’re exempt from property transfer tax. There’s a partial exemption for homes priced over $1,100,000, but under $1,150,000. Use this LINK to determine your cost and remember to tick the three boxes (first time home buyer, citizen of Canada, newly constructed home)
Title Insurance
To protect the lender’s interest in the mortgaged property in the event there is some discrepancy on title that would create a legal problem, many lenders require title insurance. Title insurance is often a less expensive and acceptable alternative to getting a survey prepared for the property. The cost can range anywhere from $150 – $450 depending on the size of the property.
Realtor Commissions
If you are purchasing and use a Realtor to help you, the seller will pay for their Realtor and yours. If you are selling, fees vary, but are often 6 or 7% on the 1st $100,000 and 3 or 4% thereafter. There are a number of lower commission Realtors, and their fees will vary. GST at 6% of the commission payable is also charged to the seller.
Legal fees
If you are selling a property, you will be responsible for legal fees regarding clearing the title for the purchaser. If you are the purchaser, you are responsible for conveyance fees, preparation of statements of adjustment, and mortgage registration. This can cost $1,400 – $2,000 depending on the number of transactions.
Interest Adjustments
This is the interest that you will pay for receiving the mortgage funds for periods outside of standard payment periods. For example, if your completion date was on the 23rd of a 30 day month, you owe 8 days interest for those days before normal payment cycles commence.
Property Tax Adjustments
Generally, property taxes for the calendar year are paid at the beginning of July. If you purchase a property before July 1st, the seller will be paying you for the days they owned the home from January 1st to completion day. You then are responsible for the entire amount to be paid to the municipality on July 1st. If you purchase a property after July 1st, you will pay the seller for the days you own the property from completion day to December 31st, as they will already have paid the entire amount to the municipality on July 1st.
Rental Deposit Adjustments
If the property has a rental suite the vendor must transfer the tenant’s security deposit to the purchaser. If completion takes place mid-month, adjustments must also be made for rent collected by the vendor and pro-rated payment made to the purchaser.
Property Insurance
If you have a mortgage on a property, almost every lender will want to make certain that you have adequately insured the property for loss from fire, flood, etc. Note that the insurance must be for the full property value rather than just the mortgage amount. In the event of a loss, it is standard practice mortgaged property generally notes the financial institution as the payee. There is a fee of about $35 for the insurance company to confirm coverage in this manner which is often referred to as a “binder.”
Please feel free to contact us if you have any questions in regard to the costs listed above.