Buying

Considering the Costs

The biggest cost of buying a property is, of course, the cost of the property 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 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 Gina or your financial advisor before you begin the search for a property.

Purchasing a property involves one-time fees, monthly and ongoing 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 are a number of other expenses that you may be expected to pay for.

Before Closing:

  • Home Inspection
  • Property Survey
  • Mortgage Down Payment
  • Deposit
  • Wood Burning Inspection Reports (WETT)
  • Oil Inspection Reports (TSSA)

Upon Closing:

  • Legal Fees
  • Legal Disbursements
  • Land Transfer & Deed Tax
  • Title Insurance
  • Adjustments
  • Goods & Service Tax
  • Mortgage Interest Adjustment

After Closing:

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

In some cases, you may be required to reimburse the seller for any unused portion of any prepaid property taxes or utility bills. These fees are called Adjustments and will be calculated by your Lawyer at closing. As well, you will also need to cover the costs of legal fees, and, if applicable, any REALTOR fees. Be prepared to furnish proof to your lender that you have obtained insurance for your new property.

On or before closing day, your lawyer and the seller's lawyer will arrange to transfer the 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 on to the seller, and your lawyer will send you a bill for any additional expenses such as land transfer taxes or outstanding legal fees.

Next: Getting Pre-Approved