Maclaren Corlett (Lawyers Est. 1873)

Tip #2 – Be prepared for the additional costs that come with your first home purchase.

When considering what money you’ll need when buying a home, the sale price of the home itself, including your down payment and fees to your real estate agent if you use one, are the obvious costs that come to mind. But there’s more, and in order to avoid any nasty surprises in the weeks leading up to your closing date, make sure you’re prepared and fully informed about those extra costs.

Land transfer tax is a common surprise; luckily, the Province of Ontario provides a refund of up to $2,000.00 for first time home buyers. To qualify for this refund (which is applied for by your real estate lawyer immediately when registering your ownership of the home), both you and your spouse (if applicable) cannot have previously owned a home, or had an interest in a home, anywhere in the world. This can be a huge monetary advantage, and the resulting savings could allow you to put down a larger down payment, buy that new couch you’ve had your eye on, or it might simply lighten the financial load. Depending on the sale price of your home, this savings could mean you are exempt from paying land transfer tax altogether; a real advantage for first time home buyers.

Property taxes can also be a (minor) additional cost that most first time homebuyers are unaware of. The vendor will only be responsible for property taxes up to the closing date, although they may have pre-paid beyond that. If that’s the case, and it often is, the buyer will be responsible for paying back the difference to the vendor. If you’re buying a condominium, you may face the same situation with condo fees. Ensuring these credits are properly calculated and paid for will be handled by your real estate lawyer, but you’ll still have to provide the required funds.

Finally, in addition to legal fees, there will be costs associated with searching the property’s title (to make sure that there is nothing registered that would adversely affect your title to the property) and registering your new ownership and mortgage (if applicable) on the property. There is the cost of title insurance, a one-time payment that protects the property owner and any lenders against losses related to the property’s title or ownership (the Financial Services Commission of Ontario (FSCO) has an informative brochure describing this in more detail); as well as any other minor disbursements (photocopy, printing and/or courier charges) your real estate lawyer may incur.

Every real estate purchase is different and the costs associated are specific to the property itself, the purchaser(s) and the vendor(s). Your real estate lawyer will walk you through the additional costs associated with your specific purchase when the time comes, but being aware that these additional costs exist from the beginning will help you to better budget for the completion of your purchase transaction.

So, tip #2 – make sure you’ve set aside additional funds, beyond your down payment and anticipated real estate fees, so that you’re fully prepared. Avoid nasty financial surprises so that you can properly revel in the excitement of purchasing your first home.