The Costs Associated With Buying A House in Ontario
New homeowners have a hard time determining the actual costs associated with buying a home. It involves finding the right mortgage loan, making an offer and having the inspection done. Purchasing a home may be an overwhelming process which involves making crucial decisions. Therefore, before buying a home, you need to ask yourself some crucial questions:
• What are the costs associated with buying a home?
• Can I really afford it?
Most lenders in Ontario advise that; when applying for a mortgage loan, you should not spend more than 28% of your monthly income. Therefore, during house hunting, you need to be very aware of the associated costs. Beyond the mortgage costs, there are other upfront costs that need to be considered. When you start working out the overall budget for your mortgage make sure you include the following costs.
Primary Costs Associated With Purchasing A Home
One of the biggest costs associated with purchasing a home is the mortgage cost. To get this right, you need to calculate how much you can afford and how much house you need. Once you strike a balance between these two, you can start looking for the ideal house. Online calculators can be used to determine an estimated price range. In Canada, Canadian Real Estate Association set the average home price for Ontario residents at $348,698.
Take some time to determine the optimal home price for your ideal home then consult a Realtor for pre-approval. The pre-approval process is very important as it helps achieve a pain-free purchasing process.
Home Inspection Fees
Potential home buyers use a professional inspector to inspect the house. The inspector identifies areas that might need repairing and gives an estimate of the costs likely to be incurred. They also give a rough estimation of the time period required to address the issues. Typically home inspection fees in Ontario run between $200- $500. The cost should cater for the inspection process together with a full report of the areas that need repair.
Other costs comprising closing costs include:
- Property buyer's down payment (estimated to be not lower than 5% of the purchase price)
- Higher ratio mortgage insurance payment (20% less down payment)
- Upfront Points against your loan
- Administration fees and your lawyer's fees
- Lawyer's fees are estimated at 1% of the purchase price
Mortgage Insurance Tax
It’s a State requirement that residents of Ontario are required to pay tax on insurance. As at April 2011, the rate of insurance tax stood at 8%. The mortgage insurance tax is assessed and then levied on mortgage and home insurance. Payment should be made before closing.
Property Appraisal Fees
Some lenders will ask for an appraisal report before giving you a mortgage. In most cases, lenders just want to make sure that the property is worth what they value it for or paying for. In Ontario, the actual property appraisal fee is estimated to be somewhere between $175- $285. The amount differs depending on the location and the complexity of the property.
Property &Land Transfer Tax
If you are looking to purchase some form of property in Ontario, you'll have to part with a land transfer tax. This mostly occurs in cases where the property is not a new home. The rate for this is estimated at 1% of the property purchase price. The amount should be paid before closing. In particular cases where the closing date is near the end of a fiscal year, the property owner will be required to part with property tax.
Most first time home buyers usually neglect these costs despite their importance. As a precautionary measure, plan for packing supplies and transportation expenses.