First time home buyers may not be aware of the additional costs that come with buying real estate (we’re talking about costs outside of the 5-20% down payment and your mortgage). These are the elements often referred to as “closing costs”. Things like land transfer tax, home inspection fees, legal fees, appraisal fees and mortgage insurance. Continue reading for a breakdown of five hidden costs that you should be ready for as you start your home buying journey.

1. Land transfer tax

Land transfer tax is by far the largest hidden cost of buying a new home. In Ontario, the buyer is responsible for paying taxes on the land transfer. But if you’re looking for a new home in Toronto it’s important to keep in mind that you’ll be on the hook for both the provincial and the Toronto-specific land transfer tax.

So, how does land transfer tax work?

Land transfer tax is progressive which means that the higher the value of your home, the more land transfer tax you will end up paying. It’s worth trying out a land transfer tax calculator so you can be prepared and know how much money you need to set aside to pay the tax.

‍

2. Home inspection fee

There are many smaller costs associated with buying a home that will add up over time; the home inspection fee is one of them. Many offers are contingent on a home inspection fee and you should set aside roughly $500 for this important “to-do”. This is so important that it even made our list of 10 key steps for first time home buyers.

‍

3. Legal fees

This is likely the largest transaction you’ve ever made, so you’ll be relying on a lawyer for much of the legal work associated with buying a home. These fees will cover things like title insurance, search cost and registrations costs. Set aside about $2,000 for your legal fees.

‍

4. Appraisal fee

Your new home will also need to be looked at by a professional appraiser. This is a step usually required by your lender to determine the property’s lending value (while your lender may have commissioned the appraisal, as the buyer you typically pay the cost). Set aside $300-$500 for this step.

‍

5. Mortgage insurance

If you’re unable to put down 20% or more, you are required to take out mortgage default insurance. This cost is typically rolled into your mortgage and will impact your monthly payment. You can learn more about what to expect for mortgage insurance via the CMHC. See? Just when you thought it possibly couldn’t get more expensive to buy a home, it does. You can try tools like closing cost calculators to get an idea of the dollar amount you should be setting aside.If you’re not sure if traditional home ownership is the right choice for you, you can look at new emerging models like Key where you start owning for just 2.5% of the value of your suite.

‍