The Additional Expenses to Expect as a Home Buyer

Published on 29 August 2022, 07:22:56 AM

When you buy a new home, you will have more than just the purchase price and legal fees to pay. In fact, there are a number of other additional costs you can expect in Ontario. This can include land transfer tax, Harmonized Sales Tax and Non-resident Speculation Tax, as well as adjustments.

Land Transfer Tax

When you are purchasing a home in Ontario, you can expect for provincial land transfer tax to be one of the biggest expenses. The total amount of land transfer tax will be a percentage of the land price that you pay, as well as the amount that is remaining on the mortgage or debt of that land. There is no land transfer tax for the seller of the land.

For example, if you have a purchase price of up to $55,000, the percentage range that you can expect for Ontario land transfer tax is 0.5%.  For purchase prices of over $55,000 to $250,000, the percentage is 1.0%. Continuing up the tax scale, if you land price is over $250,000, you can expect 1.5% land transfer tax, while over $400,000 will be 2.0%.

For first-time home buyers, or those families that have bought property during a specific time-period, there may be a chance to claim land transfer tax rebate.

Harmonized Sales Tax on the Purchase Price

You can expect there to be harmonized sales tax if you are buying a new home. It is normally the case that builders with include this tax with the purchase price, but some will also charge it as an addition fee to pay. If you are purchasing used property, harmonized sales tax will not apply. In Ontario, the harmonized sales tax is 13% of the purchase price. Always make sure that you know the purchase price of your home and if it is newly built, whether the harmonized sales tax is included.

Harmonized Sales Tax on Transaction Costs

While you may not have any harmonized sales tax to pay on the purchase price of your home, it is still going to apply to other transactions. This can include legal fees, appraisals, real estate commissions and home inspections. However, there will be no harmonized sales tax on mortgage insurance fees and land transfer tax.

Harmonized Sales Tax Rebate on New Property

It was mentioned previously that harmonized sales tax will not apply to resale homes and it is only a tax on the purchase price of a new property. It is important to note that you may be entitled to a rebate on some of the harmonized sales tax. You don’t always have to be a first-time buyer.

In order for your property to quality for a harmonized sales tax rebate, it must be newly built or have been significantly renovated. It can be a newly built home that you have bought from a builder and leased the land from the builder in an agreement. You may also be entitled to a harmonized sales tax rebate if you buy a mobile home or floating home from a builder, as well as buy a hare interest in a co-operative housing corporation that has just been built. A harmonized sales tax may apply to your own home if it has been significantly renovated, addition has been constructed or it has been rebuilt after a fire.

It is worth looking into whether you are able to enjoy a provincial and federal harmonised sales tax rebate if you are going to buy a new home.

Non-Resident Speculation Tax

If you are not Canadian citizens or permanent residents of Canada, you will have to pay non-resident speculation tax. This was introduced by the Ontario Government in 2017 and it is a 15% tax that will be applied to the price of a home that is located in the Golden Greater Horseshoe. The non-resident speculation tax is in addition to the land transfer tax in Ontario.

Adjustments on Closing

Adjustments are often made on closing the sale of a property. This is normally any expenses that apply to the home and they can be paid for by the seller, as well as by the purchaser. An example of an adjustment is having to reimburse the home’s seller for any property taxes they have prepaid. Another instance is when the property has an oil furnace for heating, the seller will normally fill the tank before the closing date. This means that the buyer will have to pay the home’s seller for the cost of this full tank.

Other addition expenses to consider when you are buying a home is the general administrative costs. You will have everything from mortgage insurance and legal fees to pay for, as well as document searches and any registration costs. You may also want to pay for a survey of the property before you buy it if the seller has not provided one.

Make Sure You know the Total Expenses

It doesn’t matter whether you are buying or selling a property, it is essential that you know the total expenses you are expected to pay in advance. This can be determined by your lawyer, who has the skills and experience to calculate all of the costs and issue an estimate of all the additional expenses you should be made aware of.