There are costs associated with applying for a mortgage or refinancing an existing mortgage. Keep yourself informed so you can make better and smarter decisions when dealing with mortgage applications and renewals.
The costs breakdown associated with applying for a new mortgage or refinancing an existing mortgage need to be disclosed to the borrower as per regulations in Canada. So make sure you go through and pay close attention to the documents provided by your mortgage agent before signing anything. The largest unexpected costs are often the lender's commission and prepayment penalty. Make sure you clarify all the costs with your mortgage agent - they are legally required and obligated to inform you of every detail regarding your application.
In addition to the costs associated with a getting or renewing a mortgage as described above, homeowners, especially new homeowners, also need to be mindful of the following cost associated with buying a property in Canada.
Land Transfer Tax – New homeowners will be obligated to pay this tax to the provincial and municipal governments. The amount is approximately 3.5% and will fluctuate between different municipalities and provinces. For example, if you are purchasing a $1.25 million dollar home in Ontario, Canada, the total Land Transfer Tax is around $42,950. Yes, that is a significant amount so make sure you budget for that when purchasing a property. With that said, keep in mind that some cities or provinces offer tax rebates for first-time homebuyers.
Legal Fees – You will need a lawyer to represent you and communicate with the Seller’s lawyer and the lender’s lawyer. And the lawyer fee is typically calculated based on the value of the property. The formula is:
Therefore, if you are purchasing a $1.25 million dollar property, you are looking at legal fees at approximately $850 + ($200,000 * 0.5%) + ($950,000 * 0.25%) = $4,225
New Account Setup Fees – Homeowners are usually required to have active utilities and insurance on the property as per the mortgage contract. And there may be account fees charged by your utilities or insurance companies.
Found this content useful? Share the love: