- within Employment and HR topic(s)
- with Senior Company Executives, HR and Finance and Tax Executives
- with readers working within the Banking & Credit, Basic Industries and Business & Consumer Services industries
For many individuals, purchasing a home is the largest financial investment they will ever make. Purchasing your first home or condominium can be overwhelming but understanding what to expect throughout the process can help ensure a seamless transition into home ownership. Below are five considerations every first-time home buyer in Ontario should be aware of.
- Once Accepted, Your Offer is a Binding Contract
The home-buying process generally begins with obtaining a mortgage pre-approval, working with a real estate agent, and searching for a suitable property. Once you have found the right home, you will submit an offer to purchase, which forms the basis of the agreement of purchase and sale (the "APS") between the buyer and seller.
The APS should be carefully drafted and customized to the specific property. Consideration should be given to any appropriate conditions, such as mortgage financing, a home inspection, or review of the condominium status certificate. In practice, the terms and conditions of an APS are highly context-dependent. For that reason, a lawyer's review of the offer is strongly recommended before conditions are waived to ensure the purchaser understand their legal obligations and rights.
Once all conditions of the APS have been waived, the APS becomes a firm and binding contract and cannot be easily terminated. If you fail to complete the purchase on the scheduled closing date, you will likely be found in breach of the agreement, resulting in the potential loss of your deposit, litigation, and significant financial consequences.
- The Purchase Price is One of Many Costs
A deposit towards the purchase price is typically paid by the purchaser upon acceptance of their offer. Deposit amounts can vary based on factors such as the purchase price, negotiations, and market conditions. The deposit is paid in advance and credited towards the purchase price as part of the closing adjustments.
Beyond the purchase price, you should budget for additional closing costs, such as:
- Provincial land transfer taxes (and municipal land transfer tax for properties in Toronto);
- Title insurance premiums;
- Legal fees;
- Disbursements, such as registration costs, software transaction charges, and bank fees; and
- Pro-rated adjustments for property taxes and, where applicable, condominium fees.
You may qualify for a refund of up to $4,000 on provincial land transfer taxes if you have never owned a home anywhere in the world, at any point in time, and will be occupying the purchased property as a principal residence.
- Understanding Title Insurance
Many first-time home buyers are unfamiliar with title insurance. Title insurance is a form of insurance that protects your ownership interest (also known as "title") in the property and issues which were unknown at the time of purchase.
Subject to the specific terms of the policy, below are examples of matters often covered by residential title insurance:
- Title Fraud, such as identity theft resulting in a fraudulent sale of the home;
- Unpermitted Work, such as structures built without a municipal permit; and
- Debts of Prior Owners, such as unpaid utilities that could form a lien against the property.
Title insurance is generally obtained for both the purchaser and their mortgage lender. The policies are ordered by your real estate lawyer, and the cost is a one-time premium reflected as a disbursement collected on closing.
Title insurance is separate from home insurance and does not replace the need for a home inspection by a qualified inspector or a thorough title search conducted by your lawyer.
- Paperwork & Meeting with Your Lawyer
Before the closing date, you will meet with your lawyer to discuss the transaction and sign the required closing documents. Generally, you will receive a comprehensive breakdown of funds in advance and obtain certified funds equal to the balance of your down payment and closing costs.
The meeting is an excellent opportunity to understand your legal obligations, confirm the accuracy of mortgage documentation, and ensure that all necessary documents have been provided to help avoid closing delays.
- Closing Day is Often a Waiting Game
In Ontario, real estate transactions are completed electronically, with registration of the transfer of title occurring up to 5:00 p.m. on the scheduled closing date. On the closing day, your lawyer typically waits for mortgage funds to be deposited into their trust account before delivering closing funds and documents to the seller's lawyer. As each transaction progresses at a different pace, the timing of closing varies significantly.
Once the transfer is registered and you legally own the property, your lawyer will provide you with information to access the property, such as the location to retrieve keys and/or a lockbox code. Since COVID-19, keys are often found in a lockbox at the property. As a result, you often do not need to attend your lawyer's office on the closing date.
If you plan to move into the property on the closing date, scheduling deliveries for the evening or next business day is recommended.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
