Wise purchasers will budget for extra costs when buying a home. There are many hidden costs that typically, buyers are unaware of before they finalize the purchase transaction. Failing to understand these hidden costs can result in surprises at the most inopportune moment-like right before closing. This column examines some of these hidden costs so that purchasers can be prepared to make these payments.

One such expense a purchaser will be faced with is the closing costs. The cost of a closing has several elements. One of these elements is the actual fee the purchaser pays to the lawyer for completing the legal work on the transaction. This work involves performing a title search, advising on the nuances of the contract, preparing the necessary documents for closing and providing the purchaser with a detailed report after closing. Some lawyers charge a flat fee for processing the purchase transaction and a separate fee for preparing the mortgage. Other lawyers will combine the fee and provide the purchaser with a breakdown for both the purchase and the mortgage.

The second element of the legal fee is disbursements. Disbursements are the costs that the lawyer incurs on the purchaser’s behalf. Examples of these are title searching costs, letters from the municipality verifying that the vendor has paid the taxes, and the title insurance premium. Title insurance can save you money by eliminating some of these costly searches as well as the necessity of obtaining a new survey of the property.

Another large expense is something called Land Transfer Tax. This is a tax levied by the Ontario Government and paid by the purchaser when the land is transferred from the vendor to the purchaser. The cost of Land Transfer Tax is quite substantial. It accumulates to approximately 1% of the purchase price. If the purchaser is buying a property valued at $200, 000, the Land Transfer Tax payable is $1, 725. The higher the cost of the home, the higher is the cost of the Land Transfer Tax. This is one of those costs that many novice purchasers overlook during a purchase transaction. Note, that if a purchaser is a first-time buyer and they are buying a brand new home from a builder, they may be exempt from paying the Land Transfer Tax. There are specific rules around this, so to be sure, check with an experienced real estate lawyer.

Registration fees are another expense that a purchaser will face when they are buying a home. This is yet another government fee which a purchaser cannot escape. In order to ensure that the purchaser is now the owner of the home, and that the pertinent bank has a valid mortgage against the home, the purchaser’s lawyer must register two documents – the Deed and the Mortgage. The cost to register each document in Ontario is $70. Thus, you will be required to pay $140, representing the registration fees for the closing.

A further often overlooked cost is something called adjustments. These are costs for matters such as realty taxes and common expenses. If the vendor is moving prior to the end of the year, but has fully paid the realty taxes for the entire year on the home that is being sold, the purchaser must make a payment to the vendor to account for this. The purchaser’s lawyer will complete this as part of the documents and funds that are exchanged on closing.

There are other costs associated with buying a home. The important thing is to consider these costs as early as possible in the home-buying process to avoid surprises at a later date. Both your lawyer and realtor can help you to avoid some of these surprises.