Purchasing your first home – or your forever home – is an exciting milestone, but it can also be a complicated journey. We are here to help you every step of the way, including explaining the costs involved so you know what to expect.
Being prepared for these expenses ensures a smoother, less stressful transition into your new home and prevents any unwelcome surprises.
To help you, we've put together a breakdown of the costs you'll need to budget for beyond that initial down payment:
- Closing Costs: The Administrative Essentials
When discussing your mortgage with us, keep in mind that there are closing costs associated with finalizing your mortgage and the property transfer. These can vary but typically range from 1.5% to 5% of the purchase price of your home. They include fees for things like:
- Lender Fees: There are standard lending fees associated with a mortgage. Ask your financial institution about additional fees.
- Title Insurance: Protects your lender against any claims or issues with the property's title.
- Property Taxes (Adjustment): You'll likely need to reimburse the seller for any prepaid property taxes.
- Other Fees: These can include things like document preparation fees.
Christopher and his team were very considerate and we felt immediately that they were honest and caring people. We instantly felt that they treated us like family as opposed to just clients, which made a major difference in our home buying process.
Matthew & Rebecca, Northern Birch members
2. Legal Fees: Ensuring Everything is in Order
Engaging a real estate lawyer is essential to ensure all legal aspects of the transaction are handled correctly. They will review contracts, handle the transfer of ownership, and protect your interests.
Your legal costs include, but are not limited to, things like title search fees, courier fees, registration costs, bank draft or wire transfer fees, and Title Insurance fees. Legal fees can vary depending on the complexity of the transaction. It’s always good to do your research to fully understand the legal fees and disbursements made by your legal team. They can vary anywhere from $1,000 to $5,000 or more. Get quotes from a few lawyers to understand the differences between their own legal fees charged.
3. Home Inspection and Appraisal: Due Diligence is Key
Home Inspection
Before you finalize the purchase, a professional home inspection is highly recommended. This thorough examination of the property's condition can identify potential issues (structural, electrical, plumbing, etc.) and save you from costly repairs down the line. Budget several hundred dollars for a comprehensive inspection.
Appraisal
Your lender will likely require an appraisal to determine the fair market value of the property. This protects their investment and ensures the mortgage amount is appropriate. Budget for a few hundred dollars for the appraisal fee.
4. Land Transfer Tax (if applicable): A Provincial Consideration
Ontario buyers are required to pay the Land Transfer Tax at the closing of a property. The amount is a sliding scale and depends on the purchase price of the property (as of April, 2025):
- 5% on the first $55,000 of the property value
- 1% of the property value from $55,000 to $250,000
- 5% of the property value between $250,000 and $400,000
- 2% of the property value between $400,000 and $2,000,000
- 5% of the property value above $2,000,000
Here’s an example to help. If you purchase a home valued at $700,000 your land transfer tax payment would be $10,475. First-time homeowners may be eligible for up to $4,000 in rebates.
Note that, when buying a home in Toronto, the city will also charge their own Land Transfer Tax in addition to the provincial fee. First-time buyers in Toronto may receive an additional rebate up to $4,475. Work with your solicitor to identify any Land Transfer Taxes associated with your purchase.
5. Realtor Commissions
When purchasing a home, you don’t have to worry about realtor commissions, but if you are selling a property and buying another, commissions will impact the final value of your sale. Commissions are between 2.50% and 6.00% of the sale price. You will also have to pay 13% HST.
Here’s an example of your earnings from the sale of a home.
House sale price: $700,000
Realtor Commission at 5.00%: $35,000
HST on the 5.00% Commission: $4,550
Total Commissions: $39,550
Left from the sale: $660,450
6. Default insurance (High-Ratio Insurance)
When you purchase a home and are contributing less than 20% towards the downpayment, your mortgage will be default insured. The insurance will be added to your regular mortgage payment, but you’ll be responsible for paying the 8% provincial tax on the closing date.
The costs vary, depending on your downpayment. For instance, if you have a 5% downpayment the default premium charged will be 4% (+PST). If you have contributed a 15% downpayment, your default premium will be 2.80% (+PST).
Your lending specialist at Northern Birch will review these costs with you to make sure you understand them.
7. Moving Expenses: Getting you and your belongings there
Don't forget the practical costs of physically moving into your new home! This can include:
- Moving Company Fees: If you hire professional movers, get quotes from several companies as prices can vary based on distance and the volume of your belongings.
- Truck Rental: If you're handling the move yourself, factor in the cost of renting a truck, fuel, and potentially moving equipment like dollies and blankets.
- Packing Supplies: Boxes, tape, bubble wrap – these seemingly small expenses can add up.
- Temporary Accommodation: If there's a gap between moving out of your old place and into your new one, you might need to budget for a hotel or short-term rental.
8. Setup for Utilities and Home Insurance: Essential Services
Before you have the keys, you'll need to set up essential services and protect your investment:
- Utility Connection Fees: Many utility companies (electricity, gas, water) charge connection fees. The property may include a rental water heater. We recommend you ask the previous owner for the contract to fully understand obligatory costs.
- Home Insurance: Securing comprehensive home insurance is crucial to protect your property and belongings from unexpected events. Get quotes from several insurers to find the best coverage at a competitive price.
Planning for Success with Northern Birch Credit Union
Buying a home is a significant financial undertaking, but with careful planning and a clear understanding of all the associated costs, you can navigate the process with confidence.
We offer a range of mortgage options and expert advice to help you achieve your homeownership goals. Our team can help you understand the full financial picture, including these often-overlooked costs, and guide you towards a mortgage solution that fits your budget and needs.
To help you cover some of the extra costs, for a limited time you can get up to $3,500 cash back when you get a new mortgage at Northern Birch. In addition, we’ll reimburse up to $550 for appraisal fees and up to $650 for mortgage transfer legal fees.*
Ready to take the next step? Contact us today for a personalized consultation and let us help you prepare for a successful and financially sound home-buying experience!
To make an appointment with a Northern Birch mortgage specialist call (416)465-4659 Option 3, or email lending@northernbirchcu.com.
*Conditions apply. Visit our website for details.
