First-Time Homebuyer? Read This Guide!

Tuesday May 14th, 2019


There are several key elements to consider when buying your first home. Some might neglect a few of these and be surprised after signing an Agreement of Purchase and Sale or upon closing. Read on to learn more.


Land transfer tax

You must pay a provincial and/or municipal (if in Toronto) land transfer tax when you acquire land. It is calculated based on the purchase price, and will vary depending on which province where the land is. This applies only to resale homes, generally, and new construction homes are usually exempt (again, varies by province).

If you are a first-time homebuyer, you may be eligible for a rebate from the government. You could potentially qualify for another rebate if you are purchasing land in the City of Toronto. Sometimes if the purchase price is low enough, the rebates will cover the entire land transfer tax amount. That is huge savings!


CMCH insurance

If your downpayment is less than 20%, you will be required to pay a monthly insurance premuim with the Canada Mortgage and Housing Corporation. This insurance protects the lender in the event of a default on the mortgage payments.

This is not a closing cost, but rather an additional cost outside of the purchase price.


Appraisal fee

Occasionally, the lender will require an appraisal of the land and/or property to  ensure you paid a fair market value price. The fee is negotiated between the mortgage representative and the homebuyer. On average, it can range between $300 to $400. In some instances, the bank will cover this fee.


Property tax

Congratulations, you're now paying more taxes! This specific tax helps pay for things like schools and street lights in your neighbourhood. Pay close attention to the listing of a resale home, as it should note the previous year's rate. Consider using a mortgage calculator, as some can calculate property tax, as well as land transfer tax

When a lender looks at your gross debt ratio (GDS), they also factor in property tax as a monthly payment. If your total debt servicing is below 44 percent based on a particular property, you’re approved.

Sellers may have prepaid property taxes or utilities, in which case you may be required to reimburse those amounts. This is known as an adjustment, and is managed by your lawyer.


Legal fees

Lawyers go over your mortgage paperwork to ensure it's correct, and ensure that your rights are protected for the transaction to go through. They also hand over the keys when the deal is done. Lawyer fees can range between $500 to $1,000 or even more, and will depend on what's required for the transaction.

Your lawyer will also conduct a title search and get title insurance in place which proves that you are the legal owner. Should there be an error in the public registry or you encounter a property ownership dispute, you’ll be fine. This typically costs between $100 and $300.


Home inspection

This isn't mandatory, but it is recommended to ge the home inspected by a professional before purchasing. This can cost around $500.

In some cases, sellers will have a the inspection done ahead of time for potential buyers to review.


Property insurance

Your property needs to be insured. upon closing. At the very least, you should have insurance in place to protect against fire or significant damage. Your house insurance can also cover any valuables inside the house. This cost will vary depending on the type of coverage you decide on.


Moving costs

Don't forget this one! And also, don't get tricked by moving companies who advertise a flat rate. Get your moving company to provide a written confirmation of what you are to pay and what you will receive for this payment.

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