Avoid any unpleasant surprises by learning about the following 9 common fees associated with homeownership:
Key takeaways
- The fees related to buying a home represent between 2% and 3% of the property's price on top of your down payment.
- Down payments generally vary from 5% to 20%, depending on the type of property.
- First-time homebuyers in certain provinces may be able to benefit from a welcome or land transfer tax credit or exemption.
| SUMMARY OF FEES | |
|---|---|
| Property appraisal fees | $350-$800 |
| Building inspection fees | $500+ |
| Legal fees | $1,500-$3,000 |
| Welcome tax or land transfer tax | Typically, 0.5-4% (depends on province or territory) |
| Renovations | Variable (e.g. bathroom renos: 10-15% of the sale price) |
| Sales tax on new properties | 5-15% (depends on province or territory) |
| Mortgage insurance premiums | 2-4% of the loan added to the monthly payments (if the down payment is less than 20%) |
| Moving and decorating costs | $500-$2,000+ |
1. Property appraisal
Cost: from $350 to over $800 (paid immediately)
Property appraisal fees vary greatly depending on the property and where it's located. This cost can be included in your financing agreement if your financial institution requires a property appraisal as a condition of mortgage financing.
Why have the property appraised?
The appraisal determines the property's market value and is sometimes a requirement for getting a mortgage. It takes into account the quality of construction and the current housing market. Basically, it ensures that the price you're paying is fair.
2. Building inspection
Cost: $500+ (paid immediately)
These fees vary based on the size, age, and type of property.
Why have the property inspected?
It's strongly recommended that you include an inspection as a condition of your offer. It helps you detect potential problems and provides a certain degree of legal protection should any latent defects (e.g. water leaks) be discovered later. An inspection can also tell you if repairs or renovations will be needed, so you can include them in your budget.
Choosing a certified inspector who’s a member of a professional association offers a level of credibility while allowing for legal recourse in case of malpractice. These professionals will also have liability insurance.
3. Legal fees
Cost: between $1,500 and $3,000 (paid immediately)
Fees for a notary or specialized real estate lawyer are honorariums, and since there are no laws regulating them, they can vary.
Why do you need a notary or lawyer?
These legal experts prepare and supervise the signature of a number of important documents (such as the deed). They are also responsible for the title search and registration.
In Quebec: All real estate transactions must go through a notary. The buyer, not the seller, is responsible for the notary fees.
Rest of Canada: Using a legal professional is not mandatory, but it's strongly recommended. A lawyer or notary can offer advice and support when buying a home.
4. Welcome tax or land transfer tax
Cost: A percentage (often progressive) of the price of the property or its municipal assessment.
This tax is a significant source of revenue for municipalities and provinces, and you'll have to pay it in the weeks or months following the closing of the sale. Depending on where you live, this tax is paid to the province, the city, or both. In Montreal, for example, this tax can vary from 0.5-4% depending on the tax base. This tax base is reviewed and updated by the city every year.
In some provinces, like Ontario and British Columbia, first-time homebuyers may be eligible to have this tax refunded.
5. Renovations
Costs: Vary depending on the type of work and materials used
We recommend you get an accurate estimate to create your renovation budget and get your financing sources in order before you start.
- Most bathroom renovations cost between $15,000 to $30,000.
- A complete kitchen renovation can cost between $25,000 to $75,000.
Make sure to live in your new home for at least a few months before you start renovating. You’ll get a better idea of which renos need to be done and the order in which to do them.
Why renovate?
Pro tip
Renovations are a way to increase the value of
your home. For example, your kitchen represents around 10-15% of your
home's value. So, if you're looking to renovate, make sure to adjust
your budget accordingly so it matches that amount.
There are also certain grants available for home renovations, including eco-friendly renovations and additions.
6. Sales tax on new properties
Cost: Between 5% and 15% of the price of a new property. This tax is an integral part of the property's final purchase price that will be financed by the mortgage loan.
Why do the percentages vary?
It all depends on your province or territory. In Alberta, homebuyers only have to pay the 5% federal tax (GST). Elsewhere, provincial taxes are added to the GST. For example, the combined rate of the two taxes for several provinces are:
- British Columbia: 12%
- Ontario: 13%
- Quebec: 14.975%
- New Brunswick: 15%
Sales taxes apply only to new properties or houses bought from a builder. Under certain conditions, you can get a rebate from the federal government for these taxes.
Foreign buyer's tax
In an attempt to calm the current real estate frenzy, some cities like Vancouver have imposed an additional 20% foreign buyer's tax on a property's purchase price.
7. Mortgage insurance premium
Cost: The premium is calculated as a percentage of the mortgage loan amount and is added to your mortgage payments.
Example
If you buy a property for $480,000 with a 5% down payment of
$24,000, the amount of your insurance premium would be $18,240. This
amount is divided and added to your mortgage payments.
Is insurance mandatory?
If your down payment is less than 20%, you must take out mortgage insurance.
Ontario, Quebec, and Saskatchewan
In these three provinces, the provincial sales tax is added to the premium and must be paid when you purchase the property.
Example
Quebec sales tax on a $18,240 premium (for a
$375,000 property) would be $1,819.
8. Moving and decorating costs
Cost: Movers charge between $50 and $250/hour (paid immediately)
This will depend on the moving company you choose, distance, how much stuff you have, flights of stairs, etc. If you decide to move yourself, renting a truck can cost up to $300 a day. And of course, you can’t forget the pizza for your friends that helped you out!
Decorating expenses
In addition to moving costs, you'll need to include a budget for furnishing your new home.
Good to know
If you move for work, you may be
able to claim certain moving expenses on your income tax return. Get
more information directly from
the Government of Canada’s webpage on the topic
.
9. Annual fees
Don't forget that there are recurring fees associated with becoming a homeowner, such as:
- Heating, electricity, and gas
- Internet, cable, telephone
- Home insurance
- Co-ownership fees when applicable (also called condo fees)
- Property taxes
- School taxes
Avoid unpleasant surprises and unnecessary stress by adding these annual expenses to your budget. By planning and saving, you can make sure you have the funds you need to cover your payments when the time comes.
Managing your taxes:
- Add your payments as shown on your property and school tax bills.
- Divide the total into a predetermined number of payments between now and the due date of your payments. You could choose to make payments every pay period, or once a month.
- Set up systematic savings to transfer the amount into a bank account, such as a savings account. This will allow you to have the required amount in your account when it comes time to pay the bill.
- Check how much you'll need to save when you receive your new tax bills each year.