What Will It Really Cost to Buy a House in Toronto?

Buying a home is one of the biggest investments that you will make in your lifetime. Setting a budget to account for the unexpected will go a long way to making your move go according to plan.

For example, imagine you have a budget of exactly $1 million, and you’ve found a house listed at $950,000. You may be pinching yourself at your good fortune. However, the listing price is just the tip of the iceberg. You’ll want to do a little more in-depth analysis before you take the next step. In this post, let’s explore both the expected and (possibly) unexpected costs of your new home.

Down Payment

The down payment is what you pay upfront for your home, while your mortgage covers the rest. The total amount depends on the final purchase price. Let’s do the math on how much you’ll need on that $950,000 home.

• 5% on the first $500,000 works out to $25,000.
• 10% on the remaining $450,000 equals another $45,000.
• You would have required 20% on any amount over $1 million. Fortunately, however, your purchase price is well below that.

This means you need at least $70,000 ($25000 + $45,000) to put towards your purchase. If you can come up with a full 20%, you can avoid mortgage insurance. Plus, you’ll pay less interest over time. It may be out of reach for many people, especially first time buyers, but it’s worth thinking about if you can make it happen.

How do you find the right house in today’s challenging market? The resources below can give you an advantage:

• How Not To Overpay For Your New Home
• How Can Home Buyers Find A Great Deal In Etobicoke?
• How To Tell If Your Dream Home Is A Money Pit Or A Worthwhile Investment

Deposit

The deposit is part of the overall down payment. The difference is in the timing. When a seller accepts your offer, you’ll place a good-faith deposit within 24 hours to secure the deal. The amount is negotiable, but usually works out to about 5% of the purchase price. In a competitive situation, a higher deposit can make your offer stand out. A good real estate agent can offer more guidance.

After the transaction closes, you will provide the rest of the down payment. Your mortgage covers the rest, and you get the keys to your new home.

Home Inspection

Though not required, a home inspection ensures that you are aware of any deficiencies before you place an offer. Depending on the market, you might be able to put a home inspection as a condition of the sale. However, adding conditions can cost you the house if other buyers are also interested in the listing.

That doesn’t mean you can’t arrange for an inspection yourself at your own expense. Since taking this step can prevent you from ending up with a problematic home, it’s well worth the $300-$500 it will cost you.

Land Transfer Fees

The land transfer tax is one of the most significant closing costs. Unfortunately, it’s also one of the few that you can’t include in your mortgage, so you will have to pay it before taking possession. Like the down payment, the amount you owe depends on the purchase price.

Let’s take a look at that $950,000 home again. The provincial tax works out as follows:

• 0.5% on the first $55,000. ($275)
• 1.0% from $55,000 to $250,000. ($1950)
• 1.5% from $250,000 to $400,000. ($2250)
• 2.0% for the remaining amount to a maximum of $2 million. ($11,000)

Add it all together, and be prepared for an additional $15,475 over and above your purchase price. It may hurt, but it would have been even worse if you had your eye on an even more expensive home. Since 2.5% is charged on any amounts over $2 million, the land transfer tax can quickly add up on high-end properties!

In Toronto, buyers also have the municipal tax, which essentially doubles the cost. There is also the luxury tax, which can get as high as 7.5% on homes worth $20 million or more.

First-time buyers have some relief to make their purchase slightly more affordable. Both the provincial and municipal governments offer a rebate. This would save up to $8,475 on both land transfer taxes.

Legal Fees

You will need a lawyer to close your home. This stage is mostly hands-off for you. In the meantime, the lawyer will review the offer and mortgage to ensure all of the terms and clauses are above board. In addition, you’ll need a title search to make sure no encumbrances or liens can interfere with your purchase. Often, you will also need title insurance, or at least it’s highly recommended.

The final price will vary depending on the hourly rate and complexity of the transaction. In other words, be prepared for an extra $500 to $1,500 before moving into your new house.

Appraisal Fees

When buying a house with a mortgage, the lender will generally require an appraisal before granting the final approval. They want to protect their investment by making sure they are not lending out more than the property is actually worth.

This is something to keep in mind if you have to offer more than the listing price to get the seller to accept you over another buyer! The appraisal is assessed at the fair market value of the home, not what you end up paying for it.

The process is similar to the free home evaluations most real estate agents provide. The difference is it’s performed by a certified apprasier and it isn’t free! Ordering an appraisal will cost about $300 to $500.

Do you plan to sell your existing home before beginning your search? The posts below will help you get started:

• Advice For Seniors Selling Their Family Home
• Can You Earn More Money By Staging Your Home?
• What Are The Fastest Ways To Add Value To Your Home When Selling?

Intangible Costs

Some of the costs of buying a home can be difficult to calculate or even intangible. For example, are you planning to hire a mover? The company will likely charge an hourly rate with a minimum time commitment. If you plan to move with the help of family and friends, you still should account for the intangible costs of your time and effort.

Your real estate agent will walk you through everything you can expect before you pull the trigger on your purchase. With expert guidance, you’ll find a home you love that is well worth your investment.

Are you ready for your next steps? Our South Etobicoke real estate agents are committed to making the purchase or sale a success. Reach out to contact@thompsonsells.com or call 416-450-5900 to get in touch with us today