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5 Hidden Costs When Buying A Home

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1) Mortgage Insurance

Mortgage insurance protects financial lenders from the risk of borrowers’ default and foreclosure. It becomes mandatory when buyers are unable to put down at least 20% of the home’s value towards their downpayment. A mortgage with 5-15% down is called called a high-ratio mortgages (compared to a conventional mortgage), and comes with insurance costs of .5- 3.5% of the total mortgage amount.

These fees are paid on a monthly basis.  For a property valued at $300,000 and on a 25 year mortgage at 5% down, you should expect to pay around $50 a month towards your mortgage insurance.

5 Hidden Costs When Buying a Home
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2) Notary Fees

It is the buyer’s responsibility to select and compensate the lawyer who notarizes the final act of sale. Expect to pay around $1000 for a good and trustworthy notary.

5 Hidden Costs When Buying A Home
5 Hidden Costs When Buying A Home

3) Land Transfer, Property and School Taxes

The land transfer tax is the tax of transferal of ownership from one owner to another. In Montreal, land transfer prices are broken down as such:

  • For homes priced between $230 and $500,000, land transfer tax will be 1.5% of the total value.
  • For homes priced above $500,000, the tax will be 2% of the total value.

Property taxes are calculated as a % of total price, and range according to the type of immovable, and the residential district.

School taxes are uniformly priced at $0.20 per $100 of assessed value ($180 school taxes per $90,000 assessed value.)

Contact us for an exact quote of your property taxes.

Find more information like this in our free guide for first time buyers.
Find more information like this in our free guide for first time buyers.

4) Title Insurance Fees

Title Insurance provides coverage for title-related risks that could affect the right of ownership of a property or the marketability of the property in the future, such as a dispute over a vendor’s legal right to sell a property, hidden building code violations, encroachment on the property by a neighbour, and outstanding legal hypotheques. It also provides important protection in the event of fraud. A title insurance policy moves these risks away from the homebuyer and the mortgage lending institution, to the title insurer.

The title insurance is paid once, during the closing of the property, and is valued at around 1% of the purchase price.

For a $300,000 property, expect to pay around $300 in title insurance.

5 Hidden Costs When Buying A Home
5 Hidden Costs When Buying A Home

5) Inspection fees

Having your home inspected is an essential step for all buyers (unless you’re buying directly from a developer). The purpose of the inspection is to find hidden defects, deficiencies and needed repairs in the home. An inspector will also give you a quote of how much it would cost to carry out these repairs. Buyers can use the quote to negotiate the asking price down, or to calculate whether the investment is still worthwhile.

You should expect to pay between $500 and $2,000 for your inspection, depending on the size and age of your home.

 

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