Don’t Forget These Extra Costs When Buying a London Ontario Home
Buying a home in London Ontario will take much more money than just the purchase price of the property, and not the things like moving costs, furniture, paint, rakes or shovels, blinds and all the thing most of us never even think about!
I’m talking about the actual costs of buying real estate, below are some costs, either hidden, or included in your mortgage or money that you will have to spend right away. Of the hundred’s of transactions we do, very few people even take these into consideration.
Now, you can!
duhhhh! you say, of course, but this is just the starting point in your calculation.
Fees paid to the provincial government for recording a title transfer, mortgage registration or other instruments.
High Ratio Insurance (CMHC)
Must be purchased if you are buying a home for less than 20% down. A sliding fee scale applies, depending on the percentage of the purchase price required in a first mortgage (some minor exceptions) which can be added to the mortgage. More information.
Obtained by your lawyer and required in many municipalities throughout Canada before a property transfer can take place. This is an acknowledgment from the building department that the property either has, or is clear of outstanding work-orders. Work-orders are specific clean-up or fix-up requirements that the owner is legally required to do, and which must be completed before ownership can be transferred.
Obtained by your lawyer at the time of sale to confirm that local taxes have been paid and are up-to-date. If they are not up to date, the seller is required to pay them from the proceeds of the sale. If there are insufficient proceeds, then you may be legally required to pay the outstanding taxes. If, on the other hand, taxes have been prepaid, you may have to compensate the seller for them.
Provincial “New Home Warranty Program” premiums — New Homes Only!
A third party (provincial) warranty program between a builder and a buyer. With the exception of Ontario and Quebec, membership in such a program is voluntary for the builder. Through these programs, your home is guaranteed against defects for at least one year. See Tarion.
Mortgage Appraisal and Application Fees
Application feees & appraisal fees are common. Generally $150 — $235 each would apply. (Be careful here, ask your lender what the fees are and if they can waive some or all of it)
A report commissioned by the buyer, usually to verify the condition of a property prior to the “firming up” of a purchase agreement. The scope and detail may vary, but most reports outline any particular problems and associated repair costs. Unfortunately, home inspectors in Ontario are not licsenced!
The legal written and/or mapped description of the location and dimensions of your land. The survey should also show the dimensions and placement on the lot of any structure, including additions such as pools, sheds and fences. An up-to-date survey is often required by a lender as part of the mortgage transaction, although Title Insurance is more prevalent and is usually included in your lawyer’s fee.
Title insurance can be purchased by home buyers to protect against potential deficiencies in a number of areas, such as the land survey. More about title insurance.
Some local utility companies (hydro, gas, oil) charge a fee on closing to connect new buyers up to their service. More common, however, is an extra charge on the first billing.
Property Tax and Prepaid Utilities Adjustments
If the previous owner prepaid property taxes or other utilities, they will be credited the prepaid portion on closing. If they paid all their taxes by April, expect a large adjustment cost on closing!
If you arrange to make your mortgage payments monthly on the first day of the month, and your transaction closes after the first day of the month, your lender will charge you interest on closing to the next interest date, called the Interest Adjustment Date (IAD), when your payment cycle will commence. This can be a sizeable amount, but it is the correct interest you should pay. For example, close on June 15th, pay 15 days interest on closing and start payments on August 1st.
Depending on your down payment, your lending institution may decide to include your property taxes in your monthly mortgage payments.
Home insurance covers the replacement value of your home (structure and contents). Your lending institution will request proof that you are insured as it protects their investment on the loan.
Shop around here; rates vary depending on the complexity issues or experience of the lawyer or the cost of their overhead and associates.
Mortgage Loan Insurance Fee
In the event of disability or death, your insurer will pay your mortgage or mortgage payments. *** Be very careful here; compare rates with your lending institution and your life insurance sales person.
Mortgage Broker Fee
Shop around; most lending institutions will pay the mortgage broker’s fee, not you. Ask up front, “Do I have to pay any fees by using your services?”
$50-$100/hour for a truck and 3 movers, 10 –30% higher at end of month and other peak times
Condos charge monthly fees and vary depending on the building.
Water Quality and Quality Certification
If the home you purchased is serviced by a well, you will require and should get regular water portability tests by your local heath unit.
If the area you are moving to has made local improvements (such as sidewalks or addition of sewers), this could impact a property’s taxes by thousands of dollars.
Land Transfer Tax
This tax is applied whenever property changes hands and the amount varies on the purchase price of the property. Your lawyer or I can let you know what this amount will be. More info.
Congratulations, you’ve read this far! Believe it or not, you are a minority and the type of person we like to work with, thorough, willing to learn, careful and prudent!
As you can see, there are extra costs to consider before you make that purchase. By working with a very good Realtor, you will be aware of these and some you may prevent.
We use a spread sheet that we developed that comes pretty close to giving you an idea of how much extra you may need when buying a home in London.
Do not stress yourself out! Be prepared! Let us organize your steps towards getting the house you want!