How to Choose Between Home Building or Moving in Toronto

A guide to making the right decision between completing a home addition or home renovation on your property and moving to a different home

It is easily one of the most common predicaments that our clients come to us with, and for good reason. Many people expect a home builder or renovation contractor to be biased in answering the question of “should I stay or should I go?”, and they are not wrong. Fortunately, there is a more technical approach to answering this question that is entirely guided by the homeowner. In this article we break down the important steps and considerations that should be taken by a homeowner trying to find out which choice is better for them. We hope that after you finish reading this article that the question about building/renovating versus moving is a little more clear to you and will give you the tools needed to move forward in either direction.

Considerations for MoVING

land transfer tax and Legal Fees

This is easily one of the biggest deal breakers when clients are evaluating a move versus building in Toronto. Land transfer tax in Toronto is double the amount elsewhere in Ontario, due to the fact that there is a Toronto Land Transfer Tax (TLTT) and Provincial Land Transfer Tax (PLTT) . To put this into perspective, check out this tool that calculates land transfer tax along with some estimated closing costs for lawyers. The property value for the calculations below are based on $1.25 million dollar purchase amount. Make sure that you are aware that the calculation is based on the PURCHASE PRICE and not the MORTGAGE VALUE. Based on the calculations, the Land Transfer Tax and Legal Fees amount to ~$44 700.

Real Estate Fees for Selling You Home

Many times the people that are contemplating between building or moving are in a smaller home and are quickly growing out of the current space. The target home usually has more space for their family to fit right into or grow into. This means that there is usually a discrepancy in property value for the house being sold and the house being bought. For this example our clients are buying a 1.25 Millions Dollar home and selling an $800 000 home. With an $800 000 home you are going to be charged anywhere between 4-5% from the real estate agent (your seller’s agent), which means that you will be paying $32 000-$40 000 to the real estate agent once the current home and new home closes. This is on top of the $44 700 from above for the land transfer and legal fees.

Other considerations and Total Value of Moving

The above fees amount to ~$75 000-$85 000 before you even move into the new home, which will take a substantial chunk out of any property value gains you may have experienced with your existing home. It is important to also consider some other areas where you may need to pay more for the move:

• Bridge financing if the sale and purchase do not line up in your favour

• Mortgage penalties for breaking your mortgage while in term

• Increases or decreases in monthly mortgage payments as a result of the change in rate between your existing mortgage and new mortgage (this would not apply to variable rate mortgages)

• Moving expenses (if you are hiring professional movers or even if you are doing it yourself, it is going to cost money)

A fair amount of money that you would want to budget for in a move like the one described above would be closer to $100 K than $85 K.

Intangible Considerations for Moving

Since humans are emotional beings and there is (most times) emotional considerations involved among the more tangible ones considered above. Some of the considerations may include:

• School - Will your move help or hinder your child’s ability to go to the schools you wanted them to go to?

• Age of children - Will there be an issue with moving your children on account of age and already-established relationships?

• Transit and Recreation - Are there more or less amenities and access to transit than the house you are currently in?

• Neighbourhood - Is the new neighbourhood a good fit for your family

• Neighbours - Are the neighbours good people? This one is usually a hard one to answer before it is too late but nonetheless we’ve heard of people moving on account of their neighbours.

Since it is very difficult to find a house that fits all of your needs in the same neighbourhood you currently reside in you will want to consider these closely before signing the Purchase and Sale Agreement for the new home.

Considerations for Building on your existing property in Toronto

Getting A Budget from a General Contractor

Many times homeowners are missing this key piece of information when determining the cost to build a home addition or renovating a home in Toronto. Any reputable General Contractor in Toronto would be able to supply a fairly accurate budget based on certain key features of your existing home and plans for what you would like to do with the home. BVM Contracting provides no obligation, free Rough Order of Magnitude Budgets for home owners looking to get a realistic cost to complete a home addition or home renovation in Toronto. We use our catalogue of existing and currently quoted projects to best estimate the cost of your project. This is an absolute must to determine if you are going to properly calculate which option between building or moving is best for you. It is important to work with a home builder or renovation contractor that has reputable estimating experience, because at this point you do not want to under-estimate the cost. If anything be a little more conservative!

Design and permitting Fees

Reaching out to a designer or architect in Toronto is sometimes difficult, but with the right General Contractor in your corner they will be able to refer you to the right company. Not only that but most times homeowners that are referred to designers/architects through a General Contractor get prioritized since a General Contractor is usually sending dozens of leads per year.

Nonetheless, it is important to understand what the cost of the design and permitting will be in order to figure out how much more money needs to be added to the total cost of the renovation or home addition project. The cost of designing and permitting a home renovation will be less than the cost of a home addition, which is less than a custom home build, but to make sure you have a real number in hand it is best to get a fee proposal from a designer or architect. BVM Contracting can help refer you to some of our preferred designers or architects so you can get a better idea of cost.

Temporary Relocation and Moving Fees

An often overlooked aspect of a substantial renovation, home addition, or new home build is the cost of separate accommodations during the course of the project. Make sure you understand the monthly cost of a rental as well as the approximate time that you will need to be out of the house in order to properly calculate this cost. Your General Contractor will be able to help you figure out the number of months the project will take to complete.

Toronto Renovation Rebates and HST Rebate

Depending on the type of renovation or home build you will be able to access a variety of renovation rebates that will help subsidize the cost of your project. The largest rebate of them all is the HST Rebate for Substantial Renovations and Home Builds, which may get you up to $16 080 in rebates from the Government of Canada. BVM Contracting can help walk you through your eligibility for certain programs and make sure you are aware of potential savings.

Refinancing Fees and monthly mortgage

When homeowners are planning to renovate or complete a home addition there is a discussion about refinancing their existing mortgage to gain access to the additional funds needed to build. Make sure you are aware of any potential fees associated with breaking the existing mortgage or refinancing the existing mortgage in any way. If there is you may want to consider additional options such as a Home Equity Line of Credit or second mortgage! Note too that there are tighter restrictions for refinancing at values above $1 million dollars so make sure you discuss your options with a registered mortgage agent or broker to get the best idea of what you can access. If you have money tucked away then you will not need to deal with this part but most times people need to access some level of cash from a lender to complete a substantial renovation, home addition, or new home build in Toronto.

Final Calculations to consider when deciding to build or renovation versus move

Once you do the work and figure out all of the numbers above, it is up to you to figure out if you will be more ahead building versus moving. The truth of the matter is there is no golden calculation to figure this out, you will have to make some educated decisions and make sure that emotionally this is a good decision for your family. If you are looking for a more definitive way of figuring this out, see below:

Proceed with Building/renovating your home IF

(Refinance Amount - i.e. the money that will be put into your bank account) - Home Building Costs - Design/Permit Costs - Relocation Costs - mortgage penalties IS GREATER THAN ZERO

No Not Proceed with Building/Renovating if the above values put you in the negative.

Proceed with Moving If

The above amount is less than zero AND New Home Purchase Amount - (Sale Amount - Real Estate Fees - Mortgage Amount - Mortgage Penalties - Moving Fees - Land Transfer Taxes) EQUALS OR IS GREATER THAN your down payment amount AND you are approved at the new mortgage amount (if applicable)

Conclusion

If you are at all confused about any of the concepts and calculations above you are not alone, the decision between building and moving is not a simple as running a few easily accessible numbers. You need to have a good team on your side to make the process as painless as possible and to get you the right information when you need it. At BVM Contracting we are substantial renovation and home building specialists, and can help get the build side costs in place for you so you can make the best decision you can between building or selling. Reach out to us to get the conversation started, you will not regret it!

About BVM COntracting

BVM Contracting is a full-service General Contractor or Home Builder located in Toronto. We provide home renovation and building services for major home renovations (kitchen renovations, bathroom renovations, basement renovations, full interior renovations, home additions, lot severances, and new home construction). Our goal is to help guide our clients through the process of renovating their home, from concept to completion.

Further than providing General Contracting and Project Management for major home renovations, we also offer value-added services such as renovation financing, renovation rebate consultations and services, building permit and design services, smart home installation services, and real estate investor services.

To learn more about our offering by visiting our services page.