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Costs of Homeownership Guide

Published on 03 Jan 2023

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Costs of Homeownership Guide

Costs of Homeownership Guide


Buying your first home is an exciting time, it will be a memorable experience that is often filled with a variety of emotions!

Watch a short video to learn more.

One way to ensure that we keep those emotions positive is through smart budgeting:

  • Saving enough for a downpayment
  • Crunching numbers to determine how much mortgage is affordable
  • Allocating funds for DIY fixes to convert your property into move-in condition

Utilize your access to a Pineapple industry expert to ensure you plan for every financial situation possible!

Costs to Prepare For

While smart budgeting, you will discover the costs don’t end there. An advantage of planning ahead of time ensures financial bumps won’t detour your homeownership plans.

Downpayment

A mortgage downpayment is the amount of money you pay upfront when purchasing a home. You’ll need to have this money saved or gifted from a family member in advance of your purchase. Typically, you will need this money at least 15 business days before the closing date and will be required to take this money to your lawyer via bank draft a day or two before closing.

Home Inspection

In certain markets, bidders may forgo home inspections but a good decision is to get a home inspection report before putting in your offer to purchase. A certified home inspector can save you thousands of dollars by identifying repairs needed down the road.

Average cost per inspection: $200 to $500

Legal Fees

Once you sign your offer to purchase, you’ll need to hire a real estate lawyer to handle your paperwork and close this transaction. This includes conducting a title search, purchasing title insurance, registering your mortgage and property, and making sure the downpayment and land transfer tax go to the correct offices on time. Legal costs will also consist of disbursements for title search fees, couriers and administration.

Average cost: $1,500+

Provincial Land Transfer Tax

All provinces, with the exception of Alberta and Saskatchewan, charge a land transfer tax when you purchase a property. Rates are a percentage that varies based on property value. The average Canadian house price is now $365,000, which would require an Ontario land transfer tax payment of $3,675. The good news is first-time buyers in Ontario, B.C. and P.E.I. can apply for a rebate of up to $4,000. Check your provincial government’s website for more information on available resources and rebates.

Average cost: Ontario’s land transfer tax ranges from 0.5% to 2%, depending on property value.

Municipal Land Transfer Tax

In Toronto, home buyers will be required to pay a secondary municipal land transfer tax. This is in addition to the 0.5% to 2% provincial land transfer tax paid to Ontario. Toronto’s average home cost is well over the national average. First-time homebuyers may benefit from a rebate on this. Typically, you will need this money at least 15 business days before the closing date and will be required to provide a bank draft to your lawyer 1-2 days before closing.

Average cost: approximately $5,725 on a $500,000 property

Mortgage Insurance

All high-ratio mortgages (where the borrower’s downpayment is less than 20% of the home’s purchase price) require mortgage default insurance from an insurer such as Genworth Canada, CMHC or Canada Guaranty. Lenders pay the insurance premium, and the cost is passed on to the homebuyer and normally added to the mortgage. The greater your downpayment in relation to your home’s cost, the lower the mortgage loan insurance premium will be.

Average cost: The premium on the total loan varies from 0.6% to 4%, depending on your percentage of loan-to-value and other features of your mortgage.

Title Insurance

For protection against losses arising from challenges to the ownership of your home, you will be required to get title insurance. Examples include fraud and forgery and title defects (such as unpaid liens on the property, encroachments, etc.). The premium for title insurance varies between houses and condos, and also by the property’s value.

Average cost: on a $500,000 house = $325; for a $500,000 condo = $150

Adjustments

If the seller prepaid property taxes or utilities, you’ll have to repay them the prorated amount.

Average cost: $400 to $700

Moving Costs

Remember to account for the cost of moving trucks, boxes, packing equipment, and anything else you might need for the big day.

Average cost: $1,500 to $5,000

Home Insurance

A must-have to protect your nest and its contents so you can begin to build your lives in safety and security.

Average cost: $1,000 to $2,000/year

Utility Deposit

If you’re a new client, be prepared to pay a deposit when you sign up for your services.

Average cost: up to $300 per utility

House Upgrades

When you least expect it, you might need to put in a new roof or rip off that Insulbrick to qualify for home insurance (or a preferred rate).

Average cost: $5,000+

Home Maintenance Gear

Most homeowners will quickly learn that power tools and property-maintaining gadgets like a lawnmower, pressure washer, wet/dry vacuums, ladders and other items are must-haves to maintain your home. It may be a good idea to start purchasing home maintenance gear leading up to your closing date so you aren’t financially overwhelmed during your first few months of homeownership.

Average cost: $1,000 to $5,000

Condo Costs

If you’re considering purchasing a condo, consider these three potential costs:

Special Assessments

Every so often, a major repair to the building dwarfs the condo’s collective reserve fund (which you pay into with your monthly condo fees). When this happens, you can be faced with a hefty extra charge.

Rent

Yes, rent! If you bought off a blueprint, don’t be surprised if construction delays push your move-in date by several months. In the meantime, unless you can stay with friends or family, you’ll be paying a landlord.

Occupancy Fees

It can take months for a condo corporation to register a new building with the municipality. You can move in, but you’re not technically the owner of your condo yet, so you’ll be charged occupancy fees (also known as “phantom rent”).

Homeownership Costs Checklist

Refer to this checklist when considering purchasing a property so you can be financially prepared for the exciting journey ahead of you!

  • Downpayment: minimum of 5% of the cost of property
  • Home inspection: $200-$500
  • Legal fees: $1,500+
  • Provincial land transfer tax: 0.5%-2% of property value
  • Municipal land transfer tax: 1.5%-2% of property value
  • Mortgage insurance: 0.6%-4% of property value
  • Title insurance: houses: $325; condos: $150
  • Adjustments: $400-$700
  • Moving costs: $1,500-$5,000
  • Home insurance: $1,000-$2,000/year

Contact your mortgage agent or broker for more information on costs to consider when purchasing a property!

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