Buying a home always includes more than just paying solely for the home. Different fees, out of pocket expenses and taxes (also known as closing costs) are all part of the home buying experience in addition to the mortgage and down payment. It is especially hard for first-time condo buyers to figure out how much exactly will it cost to close a real estate transaction in Downtown Toronto. With the closing costs coming down to 1.5% - 4% of the home’s value, expenses can easily climb up to $10,000 and more. To get a better idea of the total costs a Downtown Toronto condo purchase involves, let’s break down the costs one by one.
1. Mortgage processing fees or mortgage broker fees
Lenders and mortgage brokers will charge you for preparing and processing the loan, and the costs usually run between 0.5% - 1% of the condo sales price.
The Land Transfer Tax is among the highest closing costs in each province, but in Ontario, homebuyers pay the tax at two different government levels (the provincial and the municipal). This means that Toronto condo buyers will be double taxed. However, a generous rebate will make it easier on first-time condo buyers.
First-time condo buyers can qualify for a generous rebate on both levels and save thousands of dollars. For example, a full rebate is guaranteed for condos/homes up to $400,000, and if your condo costs more, you will pay the municipal land transfer tax only on the remaining amount. A similar rule applies to the provincial tax rebate, so you will still walk away with a nice sum if it’s your first condo.
How much exactly you will have to pay depends on the total condo price. The tax works on a marginal rate basis (from 0.5% to 2.5%). For example, a 0.5% rate will be applied to the first $55,000 of the total home price, 1% to the next $195,000, 1.5% to the next $150,000, and so on.
3. Title Insurance
Title insurance protects you against third-party ownership claims, and most lenders will insist that you get one. The costs are between $100 and $300.
Appraisals are a guarantee to lenders that your home’s true value reflects the sales price. Lenders need to know the true market value of your condo in case you default on mortgage payments. Toronto condo appraisals usually start at roughly $400, but the good news is that they may be covered by the lender.
5. Mortgage/CHMC Insurance if your down payment is below 20%
Condo buyers are obliged to pay the mortgage insurance (known as CHMC insurance) if they put down less than 20% in down payment. Luckily, the insurance is rolled into the mortgage and paid in monthly instalments. The premium rates can be as low as 1.8% of the total loan amount and as high as 4%.
6. Provincial Sales Tax on CHMC Insurance
The mortgage insurance may be a monthly fee, but the PST on the mortgage insurance is a one-time payment that has to be taken care of by the closing date. It comes to about 8% of the insurance premium.
7. Home insurance
Home insurance may not be mandatory by law, but most lenders consider it a must-have before they approve you for a mortgage. Home insurance protects your property against disasters like fire, flood or vandalism. The average costs are somewhat over $1,000 annually. In some cases, you may have to prepay one year upfront.
8. Property taxes
The property tax is an ongoing annual cost and how much you have to pay for owning a Downtown Toronto condo depends on how much your condo is worth, its condition, age, location and similar factors.
9. The condo status certificate
The condo status certificate describes the overall condition of the condo corporation and how things work in the building. The issuance of this document is around $100 + HST and it will show you how the condo building is managed, what rules apply, how much money is in the reserve fund, etc.
10. Lawyer fees
These are out of pocket expenses that run up to around $500 on average. You will need a lawyer to check the contract, the submitted documents and to oversee the title transfer. A lawyer will make sure the entire legal process runs smoothly.
11. Moving costs
Don’t forget that you will need some cash for transporting all your belongings from your old place to your new condo. Many Downtown Toronto condo buyers hire a moving company and the costs start somewhere around $70-$100 an hour.
This may seem like a lot at once, but with the right strategy and the right real estate agent on your side, you will be able to handle all the costs without unnecessary stress. If you are a first-time condo buyer, you can count on different first-time homebuyer programmes that can help you overcome all the bumps in the road to your first Downtown Toronto condo.
For more information on how to buy a condo in Downtown Toronto, contact me here.