7 Hidden Costs In Home Buying

By: Christopher Toste

7 Hidden Costs In Home Buying

Tags: Home Buying, 7 Hidden Costs In Home Buying, Toronto, Real Estate, Realtor, GTA, Home Buying, Home Selling, Homes in Toronto, Costs With Buying A Home, Home Insurance, Home Inspection, Land Transfer, Deposits, Legal Fees, Mortgage Broker, Mortgage Costs, Moving Costs


Home buying can be defined as one of the biggest purchases in someone’s life and besides the cost of the home itself, there are a few other costs associated with home buying.

Here are a list of the costs that you can expect when purchasing a home.  

1.    Home Inspection
Many buyers opt out of doing a home inspection to cut costs; however, the fee is minimal in comparison to what you may have to pay later without one. Home inspections vary in cost ($350 to $600) depending on the size of the home.

It is recommended to put an offer with the condition of a home inspection to uncover any potential major issues with the property sooner rather than later.

2.    Deposits
When putting an offer on a home, you are also expected to provide a deposit. This ensures the seller that you indeed go through with the sale when closing day arrives and if you don’t, the seller keeps the deposit. If you do go through with the sale, the deposit will be credited in full and put towards the purchase of the house. It is important to note that the deposit and the down payment are not the same thing, also the deposit is required within 24 hours with an accepted offer.

Deposits range in value and usually is 5% of the purchase price.

3.    Land Transfer
Land Transfer Tax (LTT) is paid by everyone who purchases property. The LTT is a marginal tax that is paid to the province when “buying land.” This payment is done only once the transaction has been closed. Certain municipalities, such as Toronto, have an additional municipal land transfer tax.

4.    Legal Fees
Real estate lawyers manage all of the legal paperwork involved when acquiring a mortgage. They ensure there are no outstanding debts or liens on the property. Real estate lawyers also provide a breakdown of any adjustments costs associated with the purchase. For example there might be adjustments with property taxes and condominium maintenance fees.

Adjustments are individually based as each case can differ.

Another cost in hand with legal fees would be title insurance. Title insurance protects you from such things as title defects, errors and omissions. It may also protect you from undisclosed heirs who may try to claim your property and/or fraudulently discharged mortgages. It is a cost that is worth the peace of mind and can be inquired with your lawyer.

5.    Mortgage Insurance
It is required to purchase mortgage insurance if your down payment is less than 20 percent. This type of insurance protects the lender in case you no longer can make your mortgage payments.
In addition but separate, home insurance is another cost in buying a home and this can be a monthly or yearly cost depending on what arrangements you make with the insurance company. 

6.    Mortgage & Broker Costs
Some banks still charge a fee to set-up a mortgage or to do a mortgage-related appraisal. It is important to find out what these costs would be with your mortgage lender.
In addition, if you are arranging your mortgage through a mortgage broker, you may be charged a finder’s fee as well. Usually the lender pays this fee to the broker but if you are considered a high-risk mortgagee, it may apply to you as well. 

7.    Moving Costs
Moving costs vary and it depends on your personal preference. It is best to budget for moving costs this way there are no surprises or unexpected costs.

These seven costs are ones to be fully aware of in buying a home and it is recommended to be aware of them before you go house hunting! Knowing these additional “costs” in advance are, over and above the down payment that you might have, will help you plan for a smooth closing and avoid any unpleasant surprises. You should allow at least 1.5% of the purchase price for closing costs and it is recommended to anticipate 2% to be on the safe side.  


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