I can comfortably say, the one part of the home buying process that stresses people out the most is surprises when it comes to paying for various things along the way. The stress doesn’t always come due to the amount, but when the money needs to be available.
So to help you avoid these problems, I’m going to try to outline as many (but probably not all) of the payments you will encounter as you finalize your home purchase, and when they are due.
In most, if not all cases here, your lawyer will investigate and provide you with the details of any moneys that need to be paid. I raise these items simply FYI.
In most cases (in fact, I’ve never personally seen an exception), when your offer is accepted, you will be expected to place a deposit on the home. Usually in the form of a certified cheque or bank draft. Usually almost immediately after the purchase is finalized. Deposits vary in size, but 5% is not uncommon. In fact, it will be outlined in your agreement to buy. So even if you dont take possession of your home for a few months, you will still need to have this money available to you once you sign off on the purchase.
Provincial Land Transfer Tax
As a buyer, this is something you will have to pay. The payments are based on the sale price of the home, and are tiered (which is to say, you pay ‘x’ % for the first ‘y’ dollars, and so on). You should have no trouble finding a Land Transfer Tax calculator online. It is worth noting that in Toronto, there is an additional Municipal Land Transfer Tax you are required to pay. This amount is generally due when you finalize the purchase of your home.
You will almost always have a lawyer handle the purchase of your home. They are generally the ones who pull everything together, tie up any loose ends on the home, and finalize the transfer of title to you. Lawyer fees do vary, but typically not too broadly for a real estate transaction. You should work out the fees with your lawyer in advance (again, to avoid surprises), work through with him/her what the process will look like in terms of their engagement and what information they will need from you (like who you are arranging your financing with, etc.).
The lawyer should tell you when they require their fee, but it is not unusual for them to collect their fee as part of the final closing activities.
This is the one item that trips people up the most. So pay attention. If the current owner of the home you are buying has paid their property taxes in full for the year, and you buy the home in the middle of that year, you will need to reimburse them for the balance of the taxes paid. So if they paid $1000 for the year, and you take possession right in the middle of that year, you will have to pay the prior owner $500. The same is true of any pre-paid utilities like gas, electrical, water or sewer, although the amounts pre-paid for utilities are generally lower than for taxes.
This amount is generally due when you finalize the purchase of your home.
Circumstances can vary from purchase to purchase, so don’t be surprise if there are other little ‘gotchas’ along the way. Also, you will need to have insurance on the property from the day you take possession (and just FYI, you will probably need to supply proof of that policy). You will need to set up your utilities as well (which could mean up-front admin fees). So you should go into the home buying process with all your cash & financing squared away and available to you.
I personally suggest having some form of access to $1000 over & above what you think you’ll need to have available. If you don’t spend it now, I’m sure you will find a way to spend it once you move in.
One final thing I’ll mention is, if you have money tied up in some kind of mutual fund or other financial instrument, keep in mind, you may need some time to cash it out. So my recommendation is, all the money you have should be in a bank account ready to be disbursed on the day you are ready to sign an offer.