You like a condo and see a $500’000 price tag and then all of a sudden there’s all sorts of people you have to see to make sure you get this condo before you grandma’s next visit to town so she stops telling you that you wasted all the money she’s ever given you (kidding!) – and you think “I don’t have five, hundred, thousand, dollars”. So the short answer to your question, the full price of the unit plus around 2% would make you a condo owner and probably a high value client with your bank, however it isn’t the only way – this is where the lovely mortgage comes into play.
Mortgages allow everyday people to become home owners, as long as some conditions are met. For arguments sake, our subject condo will cost $500’000 – this is the one you like. Right off the bat, you need a 10% down payment for a anything over $500k, so your bill starts at $50’000. Anything less than $500k, you can get away with putting a 5% down payment, depending on your banking relationship, credit, and a few other factors that the Mortgage Nerds can probably help you out with (get in touch with them!). So once you’ve proven that you have the $50k (liquid, cold hard cash) for a down payment, you’re given your pre approval, and then you can put in your offers. Assuming you win the offer, you give a deposit to the seller (out of your down payment) and start closing the deal.
Now if you’re a lawyer, you can close the deal your self and probably not pay anything for legal fees, but in most cases buyers will need to hire a lawyer to close their deal. Since we’re not the Law Nerds, we’re not supposed to outline exactly what the lawyers do (you know, legal reasons and stuff), but what we can tell you, is that they will transfer the funds from one party to the next, make sure title is free and clear, review your status certificate, and arrange the key exchange – and they of course, need to secure the bag, so they’ll bill you. Now, lawyers can charge whatever they want, they went to school the longest out of all us involved, but typically, the industry standard is right around the $2000 mark.
Before you can even tell a soul you own property, you have to pay tax, because you’re inconveniencing the government by transferring someone’s land to yourself (weird, right?) and in comes land transfer tax, or what the industry folks call it, LTT. You will need to pay your lawyer this tax so they can send it to the government – for the subject property, you’re looking at around $6500, if you’re in Toronto, you can except that to almost double (because the city of Toronto has it’s own land transfer tax as well) and if you’re a first time home buyer, you can expect a rebate of around $4000 on your taxes. On top of LTT, the funder will want you to get title insurance as well, so another $200-$300.
As realtors, we ask our clients to be ready for these closing costs and make sure they’re included in their home buying budget. As nerds, we say lets keep around 1-2% of the purchase price liquid on top of the down payment.
We’re nerds, you think there wouldn’t be an equation at the end of this?
Minimum Liquid Cash Needed to Purchase a Home =
(FINAL PROPERTY PRICE x 0.10) + (FINAL PROPERTY PRICE x 0.02)