Buying a New Condo — The Budget
NEW CONSTRUCTION/FREEHOLDThe question most people ask prospective lawyers is “How much do you charge?” The question you should be asking is “How much money do I need to budget for my purchase?”
Our aim is to provide you with clarity regarding your legal expenses and other costs in the beginning so you can properly budget for your purchase. Moving is stressful enough without finding out on closing that the costs are higher than anticipated.
There are 3 main categories of expenses to budget:
ONE
LEGAL FEES AND EXPENSES
The variance in legal costs from law firm to law firm is actually fairly small and our legal costs are competitive with other law firms. Give us a call and we will be pleased to provide you with both the total legal costs (fees, all expenses and HST) as well as a breakdown so you can properly budget for your purchase and avoid nasty surprises on closing.
TWO
LAND TRANSFER TAX
Land Transfer Tax is a provincial tax that is applicable on the purchase price of the property (net of the HST)
PRICE
FORMULA
$55k to $250k
1% of price – $275 = LTT
$250k to $400k
1.5% of price – $1,525 = LTT
$400k to $2M
2% of price – $3,525 = LTT
over $2M
2% of price – $13,525 = LTT
First Time Buyers are eligible for a rebate (reduction) of up to $4,000. There is a great deal of misunderstanding as to who qualifies as a “First Time Buyer”. To qualify:
- Buyer never owned a home before anywhere in the world; AND
- If Buyer is legally married, buyer’s spouse has never owned real property anywhere in the world during the time of marriage
In some cases (eg. unmarried or common law couples), one buyer qualifies for a rebate and the other does not. Partial rebates apply in those cases.
THREE
OTHER ADJUSTMENTS AND EXPENSES
Municipal Property Taxes: You share the year’s tax assessment with the seller builder pro-rata. On closing, the builder will have already paid the municipality either more or less than their share of the year’s taxes. The difference is the adjustment and it is paid on closing. There is usually a reconciliation with what you paid as interim occupancy fees. With new condominiums, the units are often not yet assessed at the time of closing so the adjustment is quite small but you should should expect the municipality to issue a supplementary tax bill at some point in the future.
- Condominium Fees: Like with property taxes, the current month’s condo fees are shared pro-rata with the builder. There is usually a reconciliation with what you paid as interim occupancy fees.
- Misc. Builder Charges: Tarion enrolment cost, builder’s lawyer’s fee, utility meter installation costs, etc. These are found in the fine print of your purchase contract.
- Lender deductions: From your gross loan, lenders may deduct any applicable CMHC premiums, retail sales tax on those premiums, a holdback for municipal property taxes if they are to be paid through your mortgage, commitment fees in some cases, etc. The amount you are borrowing and the amount the lender advances to us are not always the same. We recommend you have your lender advise you what the net advance to the lawyer will be so you can budget accordingly.