As a homebuyer in Toronto, it’s important to understand the various fees associated with obtaining a mortgage. These fees can add thousands of dollars to the cost of buying a home, so it’s essential to know what to expect before you start the process. 

The Most Common Mortgage Fees

• Legal Fees: When you purchase a home, you’ll need to hire a lawyer to handle the legal aspects of the transaction. Legal fees can vary, but you can expect to pay around $1,500 – $2,500 for a standard home purchase. Your lawyer will handle tasks such as reviewing the purchase contract, conducting a title search, and preparing the necessary documents for closing.
• Appraisal Fees: Lenders will require an independent assessment of the property’s value to ensure that the home is worth the amount you’re borrowing. Appraisal fees typically range from $300 – $500.
• Home Inspection Fees: Before you purchase a home, it’s a good idea to have a professional inspector check the property for any issues. Home inspection fees typically range from $300 – $500.
• Mortgage Default Insurance: If you’re putting down less than 20% of the purchase price as a down payment, you’ll be required to purchase mortgage default insurance. This insurance protects the lender in case you default on your mortgage. The cost of mortgage default insurance is calculated as a percentage of the mortgage amount and can be added to your mortgage.
• Land Transfer Tax: Land transfer tax is a tax that must be paid when you purchase a property. The amount you’ll pay depends on the purchase price of the home and ranges from 0.5% – 2%. In addition to the land transfer tax, there is also a municipal land transfer tax that is levied by the City of Toronto. The amount you’ll pay depends on the purchase price of the home and ranges additionally from 0.5% – 2%.. First-time homebuyers in Toronto may be eligible for a rebate of up to $4,000.
• Property Taxes: Once you own the property, you’ll be responsible for paying property taxes. The amount you’ll pay will depend on the assessed value of the property.
• Title Insurance: Title insurance is a one-time premium that protects you from any financial loss if there’s a problem with the title to your property. This fee typically ranges from $250 – $350.

Other Fees That May Be Associated With Your Mortgage

• Origination fee: A fee charged by the lender to cover the costs of processing your mortgage application. On average, the origination fees for mortgages from the three major Canadian banks are around .5% to 1% of the total cost of the loan. However, this fee can vary depending on the lender and other factors such as market trends and loan type. Some lenders may offer no origination fee loans.
  
• Prepayment penalty: A fee charged if you pay off your mortgage early. The average prepayment fees for mortgages from the three major Canadian banks vary depending on the lender and the current interest rate. Generally, prepayment penalties are equal to 3 months’ interest on the remaining balance of a mortgage.
• Penalties for breaking your mortgage term: Some lenders may charge penalties if you break your mortgage term before the end of the term. Breaking a mortgage contract in Canada typically incurs a prepayment penalty. The fee is usually the higher of three months interest or the Interest Rate Differential (IRD). The IRD is based on the amount being pre-paid and an interest rate that equals the difference between the original mortgage interest rate and the current market rate. Variable rate mortgages are usually calculated using either the current mortgage interest rate or the lender’s prime rate. Refinancing before the term ends may be worthwhile despite the potential penalty.

It’s important to keep in mind that these fees can vary depending on the lender, the type of mortgage you choose, and the specific circumstances of your purchase. Be sure to ask your lender for a detailed breakdown of all the fees associated with your mortgage so you can budget accordingly. And don’t be afraid to negotiate with your lender to see if they can reduce or waive certain fees.

In conclusion, as a homebuyer in Toronto, you can expect to pay a variety of fees associated with obtaining a mortgage. It’s essential to understand these fees and budget accordingly.