Since it is the national capital region of Canada, many people seek homes to relocate to Ottawa. It is a booming economy with a growing population and increasing property values.
The Ottawa Real Estate Board (OREB) sold 1,141 residential properties in February 2020. This was a significant increase of 13.9% as compared to the number of houses for sale in Ottawa in February 2019.
Buying a home in Ottawa is not a real concern; it’s the closing costs that many buyers are not aware of. Let’s study the closing costs that you need to pay before buying a house in Ottawa.
Deposit and Inspection Fee
The average sales price for a freehold home was around $563,694, according to OREB. Closing cost ranges between 1.5% to 4% of the purchase price. They are the legal and administrative costs that one has to pay when making a property purchase. You must hire a home inspector to get the house inspected before you buy the property. The inspection charges are around $500, depending on the level of inspection performed.
Once you decide to buy the property, you need to pay a deposit amount that will count as your down payment towards the property. Once you pay the deposit, it will act as a binding contract and show your commitment towards buying the property.
Costs Incurred by a Home-buyer
Many houses for sale in Ottawa include condos that are bought on a large scale. The condominium average prices rose to 21.3% in the last month. However, the cost in 2019 was about $349,813. There are individual mandatory costs that a purchaser has to incur, let’s study them.
- Title Insurance: This is purchased through a notary or lawyer, and it is around $100-$300. If there’s a property ownership dispute, this title insurance can protect you from incurring further losses.
- Land Transfer Tax (LTT): The majority of the states in Canada have to pay LTT when buying a property. It is a small percentage charged on the value of your home. Some cities also charge municipal LTT.
- Legal Fees: You must hire a residential real estate lawyer to prepare and record legal & official documents on your property transfer. The charges also include GST and HST cost ranging between $400-$500.
- CMHC and PST Insurance: CMHC cost is financed through the mortgage, and you pay PST in cash at the time of ownership transfer.
Cost Covered by Lender
OREB says, on an average, 1,811 properties are listed for sale in Ottawa. More than 45% of the property lawyers settled the property dispute issues. Ottawa is a friendly city, but property issues keep rising due to high costs and unaffordability rates.
In such situations, Canada Mortgage and Housing Corporation come to rescue. It lends money to property buyers and protects lenders from suffering from NPAs(Non-Performing Assets). The mortgage lender covers an appraisal fee; it is an estimate on the value of your home. An appraisal performed certifies the lender to recover the amount if you default on the mortgage.
Property Tax and Prepaid Utilities Bills
A recent study says, Ottawa has a property tax rate of 1.07% and ranks 14 out of 25 major Canadian markets. Property taxes are mandatory payments. If the previous owner has paid the full year property tax, then you may have to reimburse the owner.
The same goes for prepaid utility bills; if you already paid the bills, you may have to reimburse the previous owner. Another essential part of property transfer is property insurance. It covers the cost of replacing your home, and this cost must be paid on a monthly/annual basis as premium.
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