In Toronto, the best mortgage rates often do not include other expenses that are involved in buying a home or property. There are additional costs to consider that can amount to thousands of dollars and will significantly affect the final price of the transaction.
Here are some of the extra costs to keep in mind in addition to the mortgage amount:
Property valuation fee
Lenders charge this fee to find out what your property is worth. They need to do this so they can be sure that if you fail to repay your loan, they can repossess the property and get back the amount of the loan when it is sold. The cost of property valuation is determined by the lender and the purchase price of the home.
Home inspection fees
A home inspection is an evaluation of the home’s overall structure and systems. It is considered a safety measure to reduce a purchaser’s risk when buying a home, so many people stipulate it as a requirement in their Offer to Purchase.
Property survey
This survey will determine property boundaries, land measurements, any easements and encroachments on the property that may affect legal title. This is a lender’s requirement for them to obtain a clear lender's title insurance policy covering the face value of the mortgage.
Legal fees and related expenses
These fees are professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches, mostly for obtaining and clearing the title to the land or property. Make sure your lawyer enumerates all specifics that are related to this expense and not just merely indicate them as legal fees. Also scrutinize your Offer to Purchase with your lawyer or notary before signing on the dotted line.
GST/HST where applicable
GST/HST are taxes on purchases of property. Some properties are sales tax exempt, but generally these sales taxes are charged on new homes and not on resale purchases. The amount charged will vary depending on provinces and can be paid either through your mortgage or with cash on closing day.
Title insurance
Some lenders will require this as safety measure in the event there is some discrepancy on the property’s title, such as encroachment issues, title fraud, or undischarged mortgages that would potentially create a legal problem. In some cases, lenders will ask for this as an alternative to a property survey.
Insurance costs
If you pay down payment that is less than 20% of the purchase price of the home, your mortgage will be considered a high ratio mortgage and is required by law to be covered by mortgage default insurance. You can pay this upfront before closing or choose to add this to the principal amount of your mortgage, which in this case will incur additional interest that is at the same rate charged on the principal amount of your mortgage loan.
Some lenders will also request for your mortgage to be covered by life/disability insurance to guarantee that you are able to meet payments in the event that you or your co-borrower become disabled or die during the term of the mortgage.
Home insurance
Lenders usually make this a mortgage requirement. It protects your home and all it contains in the event of a fire, theft, storm, liability claim, or other unforeseen event. In case there is damage to your home or property, your insurer, not you, will pick up the tab.
Many Canadians when they are searching for the best mortgage rates in Toronto often make the mistake of failing to take into account all of these extra costs and fees that’s included in the housing loan. It really pays to enlist the help of a mortgage specialist to help you identify the different costs that you might incur at each stage of the home buying process. With good research and good advice, you won’t likely encounter major hurdles in buying the home of your dreams.
