What are the hidden costs when buying a home?

"Hidden Costs" refer to a property's closing costs; taxes and fees associated to the transaction between the seller and buyer. If you're working with an accredited and reputable broker hidden costs will be clearly outlined from the get-go, so that nothing is missed from your initial financial calculations.

Here is a list of expected closing costs for a property in Montreal:

1. 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 down payment. 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.
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.
3. Land Transfer Tax - The land transfer tax is the tax of transferal of ownership from one owner to another and varies depending on the value of the property you are purchasing. For the average sale this is anywhere between $3000 - $5000. Further reading, calculate your land transfer tax
4. Property Taxes - Property taxes are calculated as a % of total price, and range according to the type of immovable, and the residential district.
5. School Taxes - School taxes are uniformly priced at $0.20 per $100 of assessed value ($180 school taxes per $90,000 assessed value.)
6. Title Insurance - provides coverage for title-related risks that could affect the right of ownership of a property or the marketability of the property in the future, such as a dispute over a vendor’s legal right to sell a property, hidden building code violations, encroachment on the property by a neighbor, and outstanding legal hypothecs. It also provides important protection in the event of fraud. A title insurance policy moves these risks away from the home buyer and the mortgage lending institution, to the title insurer. The title insurance is paid once, during the closing of the property, and is around 1$ per $1000 of the sale price. For a $300,000 property, expect to pay around $300 in title insurance.
7. 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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