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Considering the Costs

The biggest cost of buying a home is, of course, the cost of the home itself. A quick way to calculate how much you can afford is to use the gross debt-service formula (GDS). Most financial institutions will require that the Principal, Interest and Taxes (PIT) on your mortgage loan not exceed 30 per cent of your gross annual income. Increasingly, financial institutions will factor energy costs into the PIT formula, moving the rule of thumb GDS from 30 to 32 per cent.

You can work it out in reverse: multiply the monthly payment on principal, interest and taxes (include any condominium maintenance fees) by 40. So if your monthly payment for these items is $1,000, you'll need a gross annual income of at least $40,000. You can discuss your mortgage limit and different types of mortgages with either myself or your financial advisor before you begin the search for a home.

Purchasing a home involves one-time costs and monthly expenses. The largest one-time cost will be your down payment. It usually represents between 5-25% of the total price of the property. In addition to the purchase price of the home, there will be a number of other expenses that you may be expected to pay for.

Before Closing:

  • Home Inspection
  • Property Survey
  • Mortgage Down Payment
  • Deposit

Upon Closing:

  • Legal Fees
  • Legal Disbursments
  • Land Transfer & Deed Tax
  • Adjustments
  • H.S.T.
  • Mortgage Interest Adjustment

After Closing:

  • Appliances
  • Home Insurance
  • Utilities
  • Mortgage payments
  • Property Taxes
  • Home Maintenance

Sometimes you may have to reimburse the seller for any unused portion of any prepaid property taxes or utility bills. As well, you must also cover the costs of any legal fees, and, if applicable, any REALTOR fees. Be prepared to furnish proof to your lender that you have obtained insurance for your new home.

On or before closing day, your lawyer and the seller's lawyer will arrange to transfer title of the property from the seller to you. The full amount of the mortgage will be transferred to your lawyer's trust account, and then to the seller, and your lawyer will bill you all additional expenses such as land transfer taxes or outstanding legal fees.