What's the true cost of buying a home?

23 February 2022 by National Bank
Keys in the door lock of the new home you just bought.

As you know, a home is more than just four walls and a roof over your head. It's a place to call your own, a cozy retreat where you'll create memories. But there are some lesser-known costs associated with buying a home. To avoid unpleasant surprises, be prepared to pay these 9 fees.

Image maison neuve

Getting ready to become a first-time homeowner

Ready to buy a home?
We’re here to help!

Check out our guide

The fees related to buying a home represent between 2% and 3% of the property's value, on top of your down payment, your regular mortgage payments and major renovations if needed. To avoid unpleasant surprises, be prepared to pay these 9 fees:

1. Property appraisal fees 

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 often a requirement for getting a mortgage loan. 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 fees 

Cost: $500 or more (paid immediately) 

These fees vary based on the size, age, and type of property.  

Why have the property inspected? 

It's strongly recommended you include an inspection as a condition of your offer to purchase. It helps you detect potential problems and provides a certain degree of legal protection should any latent defects, such as water leaks or the presence of asbestos, be discovered later. An inspection can also tell you if repairs or renovations will be needed, so you'll know to include them in your budget.  

Pro tip: It’s best to do business with a certified inspector who’s a member of an association or professional order so that in case of malpractice, you'll have legal recourse. 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 title search and registration. 

In Quebec: All real estate transactions must go through a notary. The buyer, not the seller, is responsible for paying the notary fees. 

In the rest of Canada: Using a legal professional is not mandatory, but it's strongly recommended. A notary or specialized lawyer will protect you when you're buying a home.  

4. Mortgage loan 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 $375,000 with a 5% ($18,750) down payment, the amount of your insurance premium will be $14,250. This amount is divided and added to your mortgage payments.  

Is insurance mandatory? 

You must take out mortgage loan insurance if your down payment is less than 20% of the property's purchase price.  

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 home.  

Example: Quebec sales tax on a $14,250 premium (for a $375,000 property) is $1,389.38

5. Sales tax on new properties 

Cost: Between 5% and 15% of the price of the 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, home buyers only have to pay the 5% federal tax (GST). Elsewhere, provincial taxes are added to the GST, for example:  

  • British Colombia: the combined rate of the two taxes is 12% 
  • Ontario: 13% 
  • Quebec: 14.975% 
  • New Brunswick: 15% 

Sales taxes apply only to new properties or houses purchased 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. 

6. 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 within weeks or months of closing the sale. Depending on where you live, this tax is paid to the province, the city, or both. 

Refund, anyone? 

In some provinces, like Ontario and British Colombia, first-time homebuyers may be eligible to have this tax refunded.

Stay informed

Sign up for our newsletter to get recent publications, expert advice and invitations to upcoming events.

7. Renovations 

Costs: Vary depending on the type of work and materials used  

This is why we recommend you estimate your renovation budget and get your financing sources in order before you start. You can expect to spend: 

  • At least $10,000 for a full bathroom reno 
  • Between $25,000 and $75,000 for a new kitchen  

So, which paint colour will you choose? Kermit-the-Frog green or African-sunset orange? 

Why renovate? 

Renovating is sure to update your house and make it feel more like a home. Renos can also increase your home's value. Grants are available for home renovations, especially if you’re planning on boosting your home’s energy performance.  

Pro tip: Live in your new home for at least a few months before you start renovating. This will give you a better idea of which renos need to be done and the order in which to do them. 

8. Moving and decorating costs 

Cost: Movers charge between $50 and $250 an hour (paid immediately)  

This will depend on the moving company you choose and the season. If you decide to move yourself, renting a truck can cost up to $300 a day (and don't forget pizza and beer for the friends who help you out). 

Additional expenses 

In addition to moving costs, you'll need to include a budget for furnishing your new home.  

Tax advice: If you move for work, you may be able to claim certain moving expenses on your income tax return.  

9. Annual fees 

Don't forget that there are recurring fees associated with becoming a homeowner. Here's a reference sheet: 

  • Municipal taxes (property taxes) 
  • School taxes 
  • Heating, electricity, gas 
  • Internet, cable, telephone 
  • Home insurance 
  • Co-ownership fees, also called condo fees (if applicable) 

It isn't always easy to stay calm and focused when you find your dream home. Your emotional response to a house can be the deciding factor. To make sure everything goes as smoothly as possible, don't forget about the fees related to buying a home. Expect them to cost between 2% and 3% of the property's value. If you need help reviewing your budget, feel free to contact your advisor. We’re here to answer your questions.

Legal disclaimer

Any reproduction, in whole or in part, is strictly prohibited without the prior written consent of National Bank of Canada.

The articles and information on this website are protected by the copyright laws in effect in Canada or other countries, as applicable. The copyrights on the articles and information belong to the National Bank of Canada or other persons. Any reproduction, redistribution, electronic communication, including indirectly via a hyperlink, in whole or in part, of these articles and information and any other use thereof that is not explicitly authorized is prohibited without the prior written consent of the copyright owner.

The contents of this website must not be interpreted, considered or used as if it were financial, legal, fiscal, or other advice. National Bank and its partners in contents will not be liable for any damages that you may incur from such use.

This article is provided by National Bank, its subsidiaries and group entities for information purposes only, and creates no legal or contractual obligation for National Bank, its subsidiaries and group entities. The details of this service offering and the conditions herein are subject to change.

The hyperlinks in this article may redirect to external websites not administered by National Bank. The Bank cannot be held liable for the content of external websites or any damages caused by their use.

Views expressed in this article are those of the person being interviewed. They do not necessarily reflect the opinions of National Bank or its subsidiaries. For financial or business advice, please consult your National Bank advisor, financial planner or an industry professional (e.g., accountant, tax specialist or lawyer).

Tags :

Categories

Categories

Image maison neuve

Getting ready to become a first-time homeowner

Ready to buy a home?
We’re here to help!

Check out our guide