What are the Costs of Buying a Home in Ontario?
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Are you planning on buying a home in Ontario? Congratulations! However, before you dive in headfirst, it’s important to understand the costs associated with buying a home in Ontario. From down payments to closing costs, there are many expenses to consider. In this article, we will break down the costs of buying a home in Ontario, so you can be prepared.
Down Payment
One of the biggest costs associated with buying a home in Ontario is the down payment.
A down payment is a portion of the total cost of a home that the buyer pays upfront. In Ontario, the minimum down payment required for a home purchase depends on the purchase price of the home.
If the purchase price of the home is less than $500,000, the minimum down payment required is 5% of the purchase price. For example, if a home costs $400,000, the minimum down payment required would be $20,000 (5% of $400,000).
If the purchase price of the home is between $500,000 and $999,999, the minimum down payment required is 5% of the first $500,000, plus 10% of the amount above $500,000. For example, if a home costs $800,000, the minimum down payment required would be $55,000 [(5% of $500,000) + (10% of $300,000)].
If the purchase price of the home is $1 million or more, the minimum down payment required is 20% of the purchase price.
It’s important to note that a larger down payment can help reduce the overall cost of a home purchase. This is because a larger down payment means a smaller mortgage, which can result in lower monthly mortgage payments and less interest paid over the life of the mortgage.
In addition, if the down payment is less than 20% of the purchase price of the home, the buyer will need to pay for mortgage default insurance. This insurance protects the lender in case the buyer is unable to make their mortgage payments. The cost of mortgage default insurance can vary, depending on the size of the down payment and the purchase price of the home.
Legal Fees
You’ll need a lawyer or notary public to complete the legal paperwork associated with buying a home in Ontario. Legal fees can vary depending on the complexity of the transaction, but they can range from $1000 to $2,000.
Land Transfer Tax
In Ontario, the land transfer tax (LTT) is a tax that is payable by the buyer of real property, such as a home, condominium, or vacant land. The amount of LTT payable is based on the purchase price of the property, and the tax is calculated as a percentage of the purchase price.
As of 2022, the LTT rates in Ontario are as follows:
- For properties with a purchase price of up to $55,000, the LTT rate is 0.5%.
- For properties with a purchase price between $55,000 and $250,000, the LTT rate is 1.0%.
- For properties with a purchase price between $250,000 and $400,000, the LTT rate is 1.5%.
- For properties with a purchase price between $400,000 and $2,000,000, the LTT rate is 2.0%.
- For properties with a purchase price over $2,000,000, the LTT rate is 2.5%.
First-time home buyers in Ontario are eligible for a rebate of up to $4,000 of the LTT, as long as they meet certain eligibility requirements, such as being a Canadian citizen or permanent resident, and having never owned a home anywhere in the world.
It’s important to note that in addition to the provincial LTT, there is also a municipal land transfer tax in Toronto, which is calculated separately and added to the provincial LTT.
Closing Costs
Closing costs are the final expenses associated with buying a home in Ontario. These costs can include things like property taxes, utility bills, and prepaid interest. Closing costs can vary, but they can add up to 1.5% to 3% of the purchase price of the home.
Extras
When purchasing a home, it’s important to consider the additional costs that may arise beyond the purchase price. One of these costs is the inclusion of conditions on property inspections, which can include home, well, and septic inspections, among others. These inspections can identify any issues with the property that may have been overlooked, and the cost can range from $300 per inspection to over $1,000 for a comprehensive inspection package, depending on the property.
Another important factor to consider is the cost of moving. The cost of moving in Ontario can vary depending on various factors, such as the distance of the move, the amount of items being moved, and the services required. On average, moving costs within Ontario can range from $1,000 to $5,000 or more. It’s essential to research and obtain quotes from multiple moving companies to ensure you get a fair price and quality service.
Conclusion
In conclusion, buying a home in Ontario comes with a range of costs that need to be considered. From the down payment to closing costs, there are many expenses to be aware of. By understanding these costs upfront, you can budget accordingly and make a more informed decision about buying a home.