by Why Understanding Your Finances Is Crucial Before You Submit an Offer on a Home
Buying a home is one of the biggest financial decisions you’ll ever make—so it’s important to go into the process fully informed. While many buyers focus on the excitement of touring homes and imagining life in a new space, there’s another essential piece that often gets overlooked: understanding your finances before making an offer.
Here’s why doing the financial prep work matters—and what key costs you’ll want to be ready for:
1. Land Transfer Tax: A Cost You Can’t Ignore
In Ontario, buyers are responsible for paying a Land Transfer Tax (LTT) upon closing. This amount is based on your home’s purchase price and must be paid upfront—meaning it can’t be rolled into your mortgage.
🔹 Tip: First-time buyers may be eligible for a rebate of up to $4,000 in Ontario, which can significantly reduce your LTT bill.
Don’t forget: if you’re buying in Toronto, a separate municipal land transfer tax also applies!
2. Deposit Requirements: Cash Up Front
When you make an offer on a property, you’ll be expected to submit a deposit—typically within 24 hours of offer acceptance. This amount shows good faith and commitment and is usually between 3%–5% of the purchase price, though this can vary by region and market conditions.
Your deposit will form part of your down payment, but you’ll need to have it readily available in liquid funds (not locked in investments).
3. CMHC Insurance: What It Is and When It’s Required
If your down payment is less than 20%, your mortgage will be considered “high ratio” and you’ll need mortgage default insurance—commonly provided through the Canada Mortgage and Housing Corporation (CMHC).
This insurance protects the lender, not the buyer, but it’s the buyer who pays the premium. The cost is calculated as a percentage of your mortgage and is often rolled into your mortgage balance, increasing your monthly payments. But, remember your HST on the insurance will be due on closing.
🔹 Planning tip: Knowing whether you’ll need CMHC insurance—and how much it will cost—can help you better plan your long-term budget.
4. Legal Fees: An Essential Closing Cost
A real estate lawyer is a key part of the transaction. They’ll review contracts, handle the title transfer, ensure all financial disbursements are properly managed, and register your mortgage.
Typical legal fees range between $1,500–$2,500, including disbursements (which are the out-of-pocket expenses your lawyer covers on your behalf).
5. The Rest of Your Down Payment: Be Ready
Aside from the deposit and any mortgage insurance, the remaining portion of your down payment will be due at closing. For example, if you’re putting 10% down and you’ve already paid a 5% deposit, the other 5% will need to be provided to your lawyer in certified funds before the closing date.
Make sure these funds are accessible and that there’s a clear paper trail if they’re being gifted by a family member. Lenders and lawyers will want documentation in place well ahead of time.
The Bottom Line
Preparing your finances in advance doesn’t just help you make a stronger, more confident offer—it protects you from last-minute surprises that can delay or even derail your home purchase.
As your trusted real estate guide, I’m here to connect you with mortgage professionals, legal experts, and financial advisors who can help you map out your budget and understand exactly what to expect.
Ready to start your home buying journey with clarity and confidence?
Let’s talk about your next steps and make sure your finances are ready when the perfect home hits the market.
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