Buying A House In Ontario: Costs & Tips
According to the Bank of Montreal, the average age of a first time home buyer is 29 years old. They can usually afford to make a down payment of $48,000 for a $300,000 home.
Buying a house is a big milestone in life and mortgage experts suggest that you need to make realistic decisions. Ontario has two types of home ownership: full ownership and condominium ownership. Full ownership entails owning the building and the land. If you own a condominium, it means that you only own the apartment and not the building. Before buying a home, you need to calculate how much you can afford.
This is part of the purchase price that is paid to your agent once you have accepted the offer. This amount could be 5%-25% of the purchase price and you are required to pay it before applying for a mortgage.
If you are buying a home in Ontario, you can expect to pay a deposit of $5,000 to $10,000 for a condo. Or $5,000 to $20,000 or more for a detached home.
Tips for Making A Down Payment
If you make a larger down payment, you will pay lower interest rates. If you cannot afford to pay a larger down payment, experts suggest that you pay what you can afford. This will prevent you from borrowing on credit cards and accruing high interest rates debts.
These are taxes paid to your municipal government for local services like fire protection, snow /garbage removal, and maintenance.
If you want to access any property in Ontario, you’ll have to access it through the Ontario Property Assessment Corporation (OPAC).
Home Inspection Fee
A home inspection is important because it will help you know if the house is in good condition. A home inspection is likely to cost you $300-$400. When hiring a home inspector, ensure that they have liability insurance. This is just in case they don’t do a thorough assessment of your home.
Land Transfer Tax
You will be required to pay Ontario’s land transfer tax if you purchase land. Land in this case refers to buildings, fixtures and buildings to be constructed. Land transfer tax is based on the land’s purchase price plus any balance on the mortgage or debt linked to purchase of the land.
Land Survey Fee
Lenders will require an updated survey of the property. If it’s not available, you can get a new one which could cost anywhere from $600-$900. Nowadays, most lenders will accept a title insurance, which in most cases costs less than a survey.
When you’re buying a new house, you’ll need the services of a lawyer or notary who will charge you for the services rendered. Examples of services rendered include performing searches, preparing the mortgages and drafting he title deed.
New Home Warranty
In Ontario, the new home warranty is roughly $600. It’s used to repair deficiencies or fund the construction just in case the builder does not build a standard house.
Harmonized Sales Tax
HST is paid only when you are buying a newly built home. If you are buying a new home, it’s important that you know who pays the tax. The purchase price on most homes will read ‘Plus HST’ or ‘HST Included’ and who gets the HST rebates. Most builders have included this cost in the purchase price so that the buyer does not have to pay it during closing.
If you own a unit in an apartment building, you will be required to pay a monthly fee for the building’s maintenance.
If you secure a high ratio mortgage, you will be required to buy a mortgage loan from a private company or Canada Mortgage and Housing Corporation (CMHC). A mortgage is referred to as high ratio mortgage if the down payment paid is less than 25%. If you are able to make a down payment of 5%, CMHC will charge insurance fee which is equivalent to 2.75% of the mortgage. If you manage to pay 10% and 15% down payment, your insurance fees will decrease to 2% and 1.75% respectively.
Paying off additional amounts on your mortgage could save you money on interest. When negotiating a mortgage, opt for privilege payment option. A 20% privilege payment will allow you to pay off $20,000 annually. Make sure that the privilege payment is flexible enough to allow you to pay off smaller amounts on the mortgage.
Mortgages have an option that allows payments to be made on a weekly and bi-weekly basis. This method allows you to save more as it reduces the duration of your mortgage.