PURCHASING A HOME IN ONTARIO
Purchasing a home is one of the most significant transactions that people engage in throughout their lives. It is understandable then that buyers are interested in knowing as much as possible about the costs involved in purchasing a home in Ontario before entering into a transaction. This article seeks to lay out the typical costs involved in a purchase transaction that buyers should be aware of:
Land Transfer Tax:
The purchaser is responsible for paying Ontario Land Transfer Tax. If the home being purchased is in Toronto, the purchaser is also responsible for paying Toronto Land Transfer Tax. There are websites that will estimate your Land Transfer Tax based on the value of the home being purchased. You can then confirm the figure you get from these websites with your solicitor. Click here to see the formula for calculating Ontario Land Transfer Tax. You should confirm the amount of Land Transfer Tax payable with your solicitor early on so that you are well prepared for the day of closing. If you are a first time buyer, you may be eligible on a reduction of the Land Transfer Tax payable both in Toronto and Ontario. It is recommended that you notify your lawyer that you are a first time buyer upon first contact with your solicitor. The topic of first time buyers will be discussed in detail in a separate article.
Solicitor Fees and Disbursements
In closing a purchase transaction, your solicitor will have to carry out certain searches and inquiries to ensure that you are receiving clear title to your home. In doing so, there are certain costs that the solicitor pays on your behalf. These will be billed as disbursements. Your solicitor will also order a title insurance policy on your behalf. The cost of the title insurance policy will depend on the purchase price of your home and the amount of your mortgage. We can provide you with an estimate of the cost of your title insurance as soon as we are retained to act on your behalf on the transaction. Other disbursements typically include registration of mortgage and transfer costs and bank and software charges. Please note that there may be additional disbursements depending on the specific circumstances of your case.
In addition to disbursements, there will also be solicitor fees. Ask your lawyer early on how much his or her typical fees for representing you on the transaction are. The complexity of your transaction will impact the amount of fees charged by your solicitor. If you wish for us to provide you with an estimate of fees and disbursements for your particular transaction, please contact our office via email at firstname.lastname@example.org.
Adjustments on Closing (re-sale houses and condos)
Buyers should be aware that there are often adjustments for common expenses (applicable when buying a condominium) and property taxes as of the day of closing. For example. if the seller has paid the property taxes for the entire year, the buyer will have to reimburse the seller for the amount of property taxes that seller has over-paid. Similarly, if the seller of a condominium has paid the common expenses for the entire month of April and the transaction is closing on the 5th day of April, the seller will expect to be reimbursed for the overpayment in common expenses. It is important to keep in mind that there can be other adjustments depending on your circumstances, the property you are purchasing and the agreement you have entered into. For example, if you are purchasing a brand new home, there will likely be other adjustments (please see below).
Adjustments on Closing (Brand New Homes)
Purchasers who are buying brand new homes are often surprised to see the number of adjustments on their Statement of Adjustments in favour of the builder. These adjustments may include but are not limited to cost of upgrades chosen by the buyer, HST, Tarion Warranty registration fees, levy surcharges, development charges and other possible fees. It is recommended that purchasers review the Statement of Adjustments with their solicitor to avoid surprises on the day of closing. It is important to note that buyers often agree to these adjustments when they sign the Agreement of Purchase and Sale. If you are purchasing a pre-construction home, we recommend you immediately provide your solicitor with the Agreement of Purchase and Sale so that he/she is able to review the potential adjustments and even negotiate with the builder to reduce these adjustments before the 10 day cooling period is over.
Finally, it is important to note that HST is payable on the purchase of brand new homes in Ontario. Ask your solicitor whether you are eligible for a rebate on all or part of the HST paid on closing. At Jahanshahi Law Firm, we fill out the HST rebate forms on behalf of our clients free of charge upon conclusion of the transaction.
Other Fees or Expenses
There are circumstances in which the buyer will face other fees or financial obligations when purchasing Home. The list above is not conclusive and is meant to be a general over-view of the costs involved in a typical residential transaction.
Please note that the information provided above is general information only and does not constitute legal advice.
Shahriar Jahanshahi (Barrister & Solicitor)