What to Expect

The good new! HST does NOT apply to resale homes. No HST is charged on:

  • residential rents
  • condo fees
  • purchase of resale homes

HST applies on the purchase of New Construction homes. However, homebuyers can claim a rebate for some of the provincial portion of the tax for new homes priced up to $500,000. The rebate for new primary residences under $400,000 is six percent of the purchase price (or 75 percent of the provincial portion of the tax), with the rebate amount reduced for homes priced between $400,000 and $500,000. Buyers of new residential rental properties receive a similar rebate.

New Rental Housing Rebate

New rental housing, including residential investment properties, receive a similar rebate. This rebate supports affordable rental housing in Ontario.

HST will apply to Realtor and Lawyer fees and can be further explained.

Closing Costs: You should allow at least 1.5% of the purchase price for closing costs although we recommend approximately 2% to be on the safe side. Below is a comprehensive list of closings costs that you might incur but remember that they are estimates only and should be used as a guideline as of course they may vary depending on your own specific purchase.

Legal Fee and Disbursements
A lawyer will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus H.S.T. The actual fee that the lawyer will charge will depend entirely upon the deal between you and your lawyer. Be sure to ascertain exactly what this will amount to in a worst-case situation.

We recommend you call one or two lawyers and obtain a quote directly from them including both their fee and estimates of disbursements before choosing which one you’d like to use.

Land Transfer Tax
There is usually a land transfer tax that is charged on closing when the property is transferred to your name and it can vary depending on the price of the home, whether or not you are a first-time home buyer and which city you live in Ontario, Canada. There are several land transfer tax calculators online. Plug in your numbers and it will calculate the tax you will have to pay at closing.

Property Tax and Prepaid Utilities Adjustments    At the time of a sale, the lawyer for the buyer must confirm that local taxes have been paid up to date. If they are, a Tax Certificate is issued, from which any adjustments can be made – usually requiring the buyer to compensate the seller for any prepaid taxes.

If they are not up to date, the municipality requires that the seller pay them off from the proceeds of the sale. Therefore, remember that if the previous owner has prepaid property taxes or other utilities for the year, they will be credited the prepaid portion on closing. If they paid all their taxes by April, expect a large adjustment cost on closing! Again, your lawyer will confirm all this for you.

Property Appraisal      If your lender requires an appraisal report to be completed, it will have to be done before they hand over any mortgage money. They want to be assured that the property is worth what you are either paying for it.

Home Inspection       A report commissioned by a property owner or purchaser, usually to verify the condition of a property prior to the “firming up” of a Real Estate transaction. The scope and detail may vary, but most reports indicate the specific problem and the cost to repair. Depending on the size and location of the property, a home inspection is around $400-$450 and will take 2+hours to complete.

Interest Adjustment (IA)       If you arrange to make your mortgage payments monthly on the first day of the month, and your transaction closes after the first day of the month, your lender may charge you interest on closing up to the first theoretical payment date, called the Interest Adjustment Date (IAD). Your mortgage agent will calculate this for you. Remember, that all mortgages are paid in arrears so if your possession date is June 1st, and you choose to pay monthly, then your first payment will be July 1st.

In this example there is no Interest Adjustment payable. However, if you moved in on May 29th, with your first payment on the first of the month, your first payment would still be July 1st, but there will be a three-day Interest Adjustment (from May 29th to the “official start date” of June 1st).

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