Budget Extra Cash for the First Home Purchase

      Buying your first home is an exciting process.   It’s a good idea to budget extra cash to cover the cost of obtaining a mortgage and “closing” your real estate transaction. Here are some of the extra cost items you should consider:

 Appraisal Fee:   

      Mortgage lenders will usually loan a percentage of the home’s purchase price or the market appraisal of the property, whichever is lower.  The appraisal is done by someone on the lender’s staff or by an outside professional approved by the lender.  The cost of the appraisal is most often the responsibility of the home buyer.

Application Fee: 

     Find out whether or not your lending institution charges to process your mortgage application.  In many cases, if you are dealing with a bank that you have other accounts with, they will waive the application fee.

Land Survey Fee: 

     Lenders require a plot plan or survey of the property you intend to buy.  On properties located in subdivisions in urban areas, lenders will often accept an existing survey, depending on when it was done.  However, if there is no existing survey, be prepared to pay a substantial fee for a new survey.

Insurance: 

     There are several types of insurance that may be required when buying your home.  If you are arranging a “high-ratio” mortgage (less than 25% down payment) you will need to purchase mortgage insurance.  Mortgage lenders require you to carry fire and extended coverage insurance that exceeds the amount of the outstanding balance of the buildings.  Other insurance you may want to consider include title insurance and life insurance.

Home Inspection Fee: 

     Many homebuyers choose to have a home inspection done prior to finalizing their offer to purchase.  Some lenders require a professional home inspection as well.

Legal Fees: 

     You will need to pay your lawyer to arrange your mortgage as well as for his “disbursements” such as title search, drawing up the title deed and preparing and registering the mortgage.

Land Transfer Tax: 

     This tax is payable by anyone who purchases property in Ontario.  Myself or your lawyer can assist you in calculating how much tax you will pay on your purchase.

GST: 

     If you are buying a new home, you will be required to pay GST of 7%.  GST does not apply to most resale homes.

Other Costs: 

     You will likely have to make property tax adjustments and interest adjustments on utility bills, heating, oil, etc. Feel free to ask me any questions you might have to further explain these additional costs so you have no surprises on closing day.

Maintenance and Utility Costs: 

     Be sure to budget for heating, electricity, water and any immediate renovations you may have planned. Put aside any spare cash and contribute regularly to a maintenance fund so that you are prepared for any repairs or upgrades.

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