Buying on the South Shore this fall: the costs that come on top of the price

You budget for the price of the house and the down payment, then forget the rest. The notary sends a statement, the welcome tax lands a few months later, and the bill catches you off guard. Here is what a purchase on the South Shore actually costs, beyond the listed price.

Why this matters now

The market is finally giving buyers room to breathe. The August figures released by the QPAREB (APCIQ) on September 4 show that the number of properties for sale on the South Shore climbed 28% year over year, the biggest increase in the Montreal area. More choice, more time to compare, and real room to negotiate on price. The Bank of Canada is helping too: it held its policy rate at 2.25% on September 2, with the next decision due October 28.

The trap is to pour your whole cushion into the down payment and the offer, assuming you are done paying once the offer is accepted. The costs that come due at signing, and in the months that follow, easily add up to 2% to 3% of the purchase price. On a South Shore property, that is several thousand dollars you are better off seeing coming.

The welcome tax is the biggest piece

Its real name is the transfer duty. The municipality charges it to every new owner, once, a few months after the purchase. It is calculated in brackets on the tax base, meaning the higher of the price paid or the municipal assessment. Quebec's base rates are 0.5% on the first bracket, 1.0% on the middle bracket, then 1.5% above that. Many cities add their own higher rate on the portion above $500,000.

In practice, on a $400,000 condo, that works out to roughly $4,200. On a $650,000 single-family home, expect around $8,000, and more in the South Shore cities that apply a higher bracket past $500,000. These are estimates: the exact amount depends on your municipality. Before writing an offer, I always suggest running the target price through your city's transfer-duty calculator, so you know the real number and set it aside right away.

The notary, the inspection, and the rest

In Quebec, the sale is signed at the notary's office, and the buyer pays those fees. For a residential purchase, budget about $1,800 to $3,500, taxes included, depending on how complex the file and the mortgage are. The notary verifies title, prepares the deed of sale and the mortgage deed, and splits the adjustments with the seller, for example the share of municipal and school taxes already paid.

The pre-purchase inspection usually runs between $650 and $800 for a single-family home. In a market where you have time to shop carefully, it is one of the best $700 you will spend. An inspector who spots a roof near the end of its life or a foundation to watch gives you something to negotiate with, or a reason to walk away before it is too late.

Two other costs take first-time buyers by surprise. If your down payment is under 20%, your loan has to be insured, and the 9% QST on that insurance premium is paid in cash at signing, not rolled into the mortgage. There can also be title insurance, an appraisal the lender asks for, and moving costs. Nothing enormous on its own, but it adds up fast.

What this means for you

• You are a first-time buyer: you are the one most likely to get the nasty surprise, because you are living all of these costs for the first time. Keep 2% to 3% of the price aside, on top of the down payment, and count the QST on the loan insurance in advance if you put down less than 20%. The FHSA and the HBP can fund part of the down payment, but they do not cover the welcome tax. I go into more detail in my piece for first-time buyers on the South Shore.
• You are selling to buy again: your equity covers the next down payment, but the welcome tax on the new property still has to be paid, and it rises with the price. Trade up, and the bill follows. Plan for it in your net-equity math, not after the fact.
• You are investing in a plex or income property: these costs go straight into your acquisition cost, and therefore into your return. The welcome tax, notary, and inspection on an income building run higher than for a house, and they cut into the capital you have left for renovations. Build them into your analysis before you offer, not once the offer is accepted.

These benchmarks apply to the South Shore in general, not to your specific deal. The real number depends on the city, the price, and your financing. Before you write an offer, let's talk through your full budget, costs included, so nothing surprises you at signing. Request a free evaluation or write to me, and we will run the numbers together.