There are various other fees that you should be aware of when you're buying a home. They can range from a simple transfer of property tax to the more mundane payment of realtors. Here are some tips on the ones that can affect your pocketbook.
1. Land Transfer Tax: Although the name suggests it is a tax on land, the truth is every province in Canada has a tax on purchases of real property including condos, houses and land.
Toronto is the only municipality with a second land transfer tax (MLTT). This tax is paid on day of closing and cannot be added to your mortgage. Other municipalities are looking to implement their own MLTT even though this tax hits people when they can least afford it.
2. Energy Audit/Home Inspections: A home energy audit allows you to gauge how much energy your home consumes. This assessment is conducted by a home energy auditor.
A home owner can use the info to decide where your home could use some greening up. It’s a great option for people who want to reduce their utility bills and their carbon footprint. Provincial governments may run Voluntary Home Energy Audit incentives, as Ontario did from 2007 to 2012.
During that time, over half a million homes were audited in Ontario. Ninety percent of those homes were later retrofitted for improved energy efficiency.
However, that program was taken away in 2012, and now the Ontario government has passed legislation that paves the way for mandatory Home Energy Audits, where an audit could be required prior to listing your home. The fact is: the audits can be costly: $350-$500.
Home inspections are a great way to determine specifics about your home.
If you have never owned a house before you will find it beneficial to learn how to maintain the property in a way that protects your investment.
The inspector may leave you with a large binder full of tips, diagrams and projected costs. Since each property is unique it’s a great idea to follow your home inspector around as they perform their due diligence.
The cost varies from $400 to $600. Some of the other inspections you may need to consider are pool inspections, well water tests, pest/termite inspections to name a few. Money well spent.
3. New Development fees: When you buy new construction you should be very aware that the sales person in the sales office works for the developer. She doesn’t work for you, so you must get your own professional advice from a realtor who is savvy in this type of sale, and a lawyer who is very familiar with dealing with builders.
Each contract is different, there is no such thing as a standard form for new construction.
There may be fees buried deep in the lengthy contract that you may not be aware of.
Some of those will include development charges and levies. There may be charges for selling the unit prior to registration of the condo building. You may be charged for meter installation for utilities. You may have to pay for your driveway and fence; you may have to pay for your upgrades in cash months or a year before your expected occupancy date.
It’s best to know what the charges are, cap them when you can, and factor those costs into the price you will have to pay on closing.
4. Lawyer/Realtor fees: While typically buyers don’t pay the realtor on a purchase of real estate it can happen in certain situations.
Usually the home seller pays the real estate fees. If the buyer is responsible for the commission they usually compensate by negotiating a lower purchase price.
It is required by law to use a lawyer to close a real estate transaction in Canada. A lawyer will handle the disbursements on your behalf and will perform some important tasks that are often time sensitive. You can ask the lawyer how much they charge before hiring them, but remember, as with everything else, you get what you pay for.
Also be sure to compare apples to apples. In other words, as what they are including or excluding in their quote to be certain you are getting the full picture.
Buying or selling an assignment can cost more money than a typical resale and it could cost more to purchase than to sell. Always work with a lawyer, realtor or any professional that has experience and know-how in the area or type of real estate you are buying, be it a farm, cottage property, new construction or urban/suburban home.
Some good news, first time buyers can borrow up to $25,000 tax free from their RRSP and take up to 15 years to pay it back. A couple that qualifies can take a total of $50,000. That can help pay some of the expenses and give buyers a bit of breathing room.
It’s a good deal Canada, and you should take advantage of it.