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Home Operating Costs
The following is an estimate of the costs involved in the normal operation of a home in the Toronto area. As prices vary from one area of the city to another, these figures should be used only as a guide.
Monthly Mortgage Payment
Just like when you rent, as a new homeowner, you will have a monthly payment to make. The size of your mortgage payments will depend on the amount of your down payment, the amortization period (25, 30, 35 years), the term (fixed rate, variable rate) and your payment schedule (bi-weekly, bi-weekly accelerated or monthly).
Property owners have the option of paying their property taxes in eight installments over the course of the calendar year. Mortgage companies may insist that they pay the property tax and collect it with your monthly mortgage payment. Realty taxes range from $1,000 to $5,000 a year and up, depending on the size and location of the property. In general, 1.1% of the assessed value is the approximate range you can expect to pay.
Home heating will usually be provided by natural gas, oil or electricity. Cost varies depending on the type of fuel, size of home, amount of insulation, exposure and usage. Electricity is usually more expensive.
Costs vary greatly depending on usage/number of persons in the household, and energy efficiency of appliances. Billing is generally every two months with the option of monthly equal billing.
Insurance is essential for all home owners, and proof of property insurance is required by your mortgage company before it will release the funds to close the deal. Premiums are based on the replacement cost of the building and can range from $350 to $700 per year.
Water & Solid Waste Management
Most properties in Toronto are now on water meters and are billed according to usage. Some older parts of the city are still on a flat rate system. Your Solid Waste Management fee will pay for garbage, recycling, green bin, litter prevention, landfill management and other diversion programs. These utility bills will be issued three times a year.
When you make an offer on a home, a deposit of 5% (or more) of the purchase price is made to show good faith and your intent to purchase the property. This will become part of your down payment.
The more money you put down, the less interest you will pay over the life of your mortgage. 20% of the purchase price is required for a conventional mortgage. In order to put less than 20% down, mortgage default insurance is required. Mortgage insurance premiums are paid once, but can be added to the principle of the mortgage.
A home inspection is strongly recommended for most residential properties and will usually be a condition of the offer. We can assist you in choosing a reputable home inspector. The cost will vary depending on the value, age and use of the property, but it is generally around $500.
You may wish to hire a termite inspector as well as a home inspector if you are buying in an area of the city where termites are known to be a problem. This could add another $200 to $300 to the cost of your inspection.
Prepaid Property Taxes and/or Utility Bills:
These disbursements are to reimburse the Seller for prepaid costs such as property taxes, filling the oil tank etc.
Property Appraisal Fees
When you apply for a mortgage, the lender will want to see an appraisal on the property to ensure that the purchase price falls within the accepted range of value for that type of property and that area of the city. The fee for this service ranges from $250 to $350.
When you make an offer on a freehold property you will usually ask the Seller to provide a copy of the survey. The purpose of this survey is to show the boundaries as well as the footprint of the building on the site. If there is no survey available, you may wish to hire a surveyor to prepare one. The fee is in the $1,000 to $2,000 range.
Title insurance provides protection against the future costs of remedying most problems with the title on your property. It is best to discuss Title Insurance with your lawyer who can provide you with relevant information and advise you accordingly.
Land Transfer Tax
This tax is payable by the Buyer on closing and is based on the purchase price of the home. Refer to our handy calculator at the link below to determine applicable land transfer taxes on your potential home:
Legal Fees and Disbursements
Legal fees vary depending on the complexity of the transaction and the experience of the lawyer. It is recommended that you choose a local lawyer who is well versed in real estate transactions. We would be pleased to refer a lawyer if you do not already have one. Legal costs must be paid upon closing and are a minimum of $500.
The Seller is required to pay the HST on the real estate commission. Unless otherwise indicated, Buyers are responsible for paying applicable taxes on appraisal services, land survey, home inspection, and termite inspection. Legal fees and the premium charged on Canada Mortgage Housing Corporation (CMHC) loans or Genworth Financial Canada are also subject to taxes.
We can also provide you with a few referrals for a mover. You can ask about their hourly rate, but you will also want to know how much the moving company charges for travel time and how many movers are included.
OTHER POSSIBLE COSTS
o Service connection fees: Charges for utilities, telephone, gas, electricity, cable TV, satellite TV, Internet etc.
o Renovations or Repairs
o Window treatments
o Decorating materials
o Snow clearing equipment
o Gardening equipment
If purchasing a condominium, there will be some additional fees, including:
o Status/Estoppels Certificate
o Initial payment of the monthly condominium fees
Owning your home is an exciting proposition, but comes with financial obligations. By carefully counting the cost in advance – doing your homework – you can be better prepared to manage the expenses of home ownership.