Let’s talk $$$- The Cost to Making a Move!
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Let's talk $$$-
The Cost to Making a move
In Ontario, buying or selling a home comes with various costs that can add up significantly beyond just the purchase price or the sale price. These costs include fees, taxes, and other expenses that both Buyers and Sellers should be aware of. Let’s explore the $$$ that are associated with buying and selling a home in Ontario.
Costs For Buyers
1. Costs for Buyers
Buying a home involves several costs that go beyond just the mortgage payment. Here are the main ones:
Down Payment
- First-time homebuyers: Minimum down payment is 5% of the purchase price for homes up to $500,000. For homes over $500,000, the down payment is 5% on the first $500,000 and 10% on the portion above that. If the home is over $1 Million, you need 20% down (Check out our blog on down payments here for more info)
Land Transfer Tax
- Provincial Land Transfer Tax: Based on the purchase price of the property. For example, on a $500,000 home, the Ontario land transfer tax is approximately $6,475. There is a rebate for first-time homebuyers of up to $4,000.
- Toronto Land Transfer Tax: If you’re buying in Toronto, you’ll also need to pay a municipal land transfer tax, which is roughly equal to the provincial land transfer tax.
Legal Fees
- Expect to pay between $1,500 to $2,500 in legal fees, which cover title searches, deed transfers, and other administrative tasks.
Home Inspection
- A home inspection typically costs between $300 and $500, though this is optional, it’s highly recommended.
Appraisal Fee
- Required by the mortgage lender to assess the value of the property, usually costing around $300 to $500.
Title Insurance
- Protects you against title fraud and other issues with the property title. This usually costs between $300 and $500.
Mortgage Default Insurance (if applicable)
- If your down payment is less than 20%, you will need to get mortgage default insurance (CMHC insurance). The premium is typically added to your mortgage, but it can be several thousand dollars depending on the size of your down payment.
HST (on new homes)
- New homes in Ontario are subject to HST (13%). There are rebates available depending on the price of the home, but HST can still be a significant cost.
Property Tax Adjustment
- Depending on when you take possession of the home, you may need to reimburse the seller for pre-paid property taxes.
Moving Costs
- Moving costs vary based on distance and services, but expect to pay anywhere from a few hundred dollars to several thousand.
Costs For Sellers
2. Costs for Sellers
When selling a home in Ontario, the costs can also add up. Here are the primary expenses sellers typically face:
a. Real Estate Commission
- The largest cost for sellers is the real estate commission, which is typically 4% to 5% of the sale price. For example, on a $500,000 home, the commission could range from $20,000 to $25,000, split between the buyer’s and seller’s agents. Remember that commissions are negotiable and it is always important to have a conversation with your Realtor® regarding how that commission structure will be.
b. Legal Fees
- Sellers also need to pay legal fees, usually in the range of $1,000 to $2,500, for closing the sale and handling the transfer of ownership.
c. Mortgage Discharge Fees
- If you are paying off your mortgage early, there may be a discharge fee (typically $200 to $300) and possibly a prepayment penalty, which can vary based on the terms of your mortgage agreement.
d. Home Staging and Repairs
- To maximize the sale price, many sellers invest in staging and making minor repairs or renovations. Home staging can cost anywhere from $1,500 to $5,000, depending on the size of the home and the level of service. A minor investment can be a financial gain when selling your home.
e. Moving Costs
- Similar to buyers, sellers will also face moving costs, which can vary based on the circumstances.
Summary of Buyer Costs
Being aware of these costs and budgeting for them can help both buyers and sellers plan for the financial impact of a real estate transaction in Ontario. Plan for a contingency fund of 10% extra in case of any incidental charges.
Seller's Cost
Buyer's Cost
- Real Estate Commission (4% to 5% of the sale price)
- Legal Fees ($1,000 to $2,500)
- Mortgage Discharge Fees ($200 to $300)
- Prepayment Penalty (if applicable)
- Home Staging and Repairs
- Moving Costs
- Down payment (minimum 5%)
- Land Transfer Tax (provincial and municipal, if applicable)
- Legal Fees ($1,500 to $2,500)
- Home Inspection ($300 to $500)
- Appraisal Fee ($300 to $500)
- Title Insurance ($300 to $500)
- Mortgage Default Insurance (if applicable)
- HST on new homes (if applicable)
- Property Tax Adjustment
- Moving Costs
