4 costs of homeownership to add to your house-hunting budget

Once the previous owner of your new home signs over the deed, you can pop the champagne. You’re officially a homeowner! You now have “title” to the property, which means you now have legal ownership.

Although it’s optional, many people choose to buy title insurance to protect themselves against any losses related to the property’s title. This includes:

• Title fraud
• Mistakes when it comes to surveys and public records
• Undisclosed claims or legal rights against the property — for instance, if the owner had unpaid debts secured against the property
• Encroachment issues — for example, your fence needs to be removed because it’s sitting on your neighbour’s property
• Unknown title defects that would suggest you don’t have clear ownership of the property
   

The price of title insurance starts at roughly $150 to $350, but can go higher.

Learn more about title insurance Opens in a new window.

Newcomers from the US will already be aware of title insurance, as it actually originated in Pennsylvania back in 1853 Opens in a new window..

It’s also available in many other countries, such as Australia, the UK, Mexico, New Zealand, Japan, China, South Korea and across Europe. Its adoption has been a little slower in other countries like India Opens in a new window..

When you buy a new home in Canada, you’ll be responsible for paying a property transfer tax, also known as a land transfer tax, unless you live in Alberta or Saskatchewan. In that case, you’ll have to pay a smaller fee called a land and mortgage registration fee or title transfer fee Opens in a new window..

If you’re drawn to Ontario because of its major cities and tech hubs, for example, you’ll pay a marginal tax rate as follows:

• 0.5% on the first $55,000
• 1.0% on homes ranging from $55,000 to $250,000
• 1.5% on $250,000.01 to $400,000
• 2.0% on 400,000.01 to 2 million
• 2.5% on 2 million and up
   

Let’s say you win the house-hunting lottery and find a home in Ontario for a drool-worthy $200,000, you’ll pay about $2,000 in land transfer taxes.

Property transfer taxes are common in many countries around the world, but costs vary widely based on state, country or municipality. For instance, in the Philippines, transfer taxes are typically 0.5% of the sale price, while in Pakistan transfer taxes averaging 6% of the purchase value are payable (PDF, 1.4 MB) Opens in a new window.. Instead of (or sometimes in addition to) transfer taxes, other countries may pay stamp duty and/or registration fees.

Review land transfer taxes by province Opens in a new window.

Use this calculator to estimate your land transfer tax Opens in a new window.

When buying a new home, you’ll want to connect with a real estate lawyer as soon as you’re ready to sign the Offer of Purchase. The lawyer will be in charge of handling title and tax searches, arranging for title insurance, drafting the title deed and making any necessary preparations for your mortgage.

Once you wrap up the closing costs on your new abode, you’ll then have to pay for legal fees and any disbursements. This includes any out-of-pocket expenses your lawyer covered, such as land title registration fees and any courier or copying costs. Legal fees really vary based on the lawyer, where you live and the complexity of your home purchase. A broad estimate is anywhere from $500 to $2,000 through either a flat or hourly fee.

Hiring a real estate attorney is a pretty normal practice around the world. What might differ, though, is how rates are calculated. In the Philippines, for instance, a real estate agent’s fee is usually 3% to 5% of the property value Opens in a new window..

If your dream home in Canada is newly built or heavily renovated, you may have to add a Harmonized Sales Tax (HST) or a Goods and Services Tax (GST) to your list of expenses, depending on where you live. This goes on top of your purchasing cost.

So, if you’re in Vancouver and buy a shiny new $500,000 condo, the GST there is 5%. You’ll be paying an additional $25,000. Likewise, if you buy a newly built, never-lived-in condo in Toronto, the HST is 13%, so you’ll owe $65,000 Opens in a new window..

If those costs seem hefty, you might find some relief from the GST/HST New Housing Rebate. A real estate lawyer can help you figure out your options.

These expenses may come as a surprise if you’re new to Canada, since value-added tax on residential real estate is less common in many other countries for the average homebuyer (PDF, 1.4 MB) Opens in a new window.. But being prepared for them ahead of time can help you plan a budget, so you can get to the exciting stuff — like making memories in your new home.