BUYING COST

Buyers Costs

During the home buying process, especially for first-time buyers, unexpected costs may come into play that weren't planned for. The list below outlines the extra costs involved in purchasing a home. These factors should be considered when putting together your home buying budget.

Initial Deposit (5 % of purchase price)

A deposit normally goes with your offer to purchase. The deposit is held in trust by the selling brokerage as a stakeholder deposit and is forwarded to the lawyers to become part of your down payment. Generally, a deposit is expected to be 5% of the purchase price of the home. You'll have to be prepared to write this cheque when you make your initial offer. Often times the mortgage broker can help you to arrange a line of credit for these funds.

Home Inspection ($400+)

An inspection prior to closing a purchase is highly recommended to any buyer purchasing a resale or even a new home. The inspector will look at key areas on the property and generate a report based on their findings. Once again, the inspector's fee will be based on the size and complexity of the inspection, however, you can expect the fee to be upwards of $400 for typical strata and upwards of $550 for a single-family home (depending on the square footage). A larger or smaller home will affect the price one way or the other.

Appraisal Fee ($300+)

Don't be surprised if your lender requests an appraisal on the property you want to buy. The lender will loan a percentage of the value of the property. If they feel the property has been overvalued, they may request an appraisal and may use that amount to base the loan amount on. Depending on the size and intricacies of the house, an appraisal can cost between $300 and $1000 (and up).

Land Survey ($500+)

Like the Appraisal, your lender may require a current survey certificate for your purchase. This is to ensure that the structures on the property do not interfere or encroach on the neighbors. We are finding quite often the lender forgoes the survey and instead requires Title Insurance for the property.

Title Insurance ($300+)

Your lender may require you to obtain Title Insurance - it will protect you against issues that may arise such as encroachments, undisclosed liens, or even undischarged mortgages left by the properties' previous owners. The cost is usually around just upwards of $300. (but does depend on the property). Your lawyers will arrange this for you and it will be an extra cost at the closing.

Mortgage Loan Insurance (1.5% - 3.35% of the principle amount of the mortgage)

When a home buyer pays less than 20% as their down payment, they are required to purchase Mortgage Loan Insurance through a provider like the Canadian Mortgage & Housing Corporation. Some lenders will let you tack this expense onto the mortgage itself. In the case that you can't pay for your mortgage, this policy will come into play. The amount that you will have to pay for insurance will be determined by the amount of your down payment. If you put 5% down, you will pay 1.5% to 3.35% of the principle plus applicable costs. For example, on a $300K property with 5% down ($15,000), you will have to pay an additional $8977.50 to the insurer.

Property Insurance ($ depends on amount of coverage and reconstruction costs)

Your lender will require that you have a property and full insurance on your new purchase. After all, it's their investment too at this point and the house itself is security against the loan. Your lawyer will need confirmation that the insurance is in place. If something were to happen to the home, this insurance would be paid to the lender first. Then you will have to communicate with your lender to secure funding to rebuild. Your home insurance will be based on the amount of coverage you require as well as common reconstruction costs in the event that the property is damaged.

Land Transfer Tax

This charge is incurred whenever a property changes owners and is calculated based on the purchase price. Most provinces will charge a provincial land transfer tax and some municipalities also charge an additional city land transfer tax. In British Columbia, Property Transfer Tax is a tax paid to the BC Government by the Buyer of real estate. The tax is calculated as 1% of the first $200,000. of the Purchase Price PLUS 2% of any remainder over $200,000. Plus 3% of any portion between $2 million and $3 million increase to 5% on any portion over $3 million – calculated based on the Purchase Price. This tax must be paid on the date the purchase is registered at the Land Title Office. There are some exemptions available for this tax to first-time buyers.

Legal (Notary/Lawyer) Fees ($1000 - $1500+)

Every transaction that happens in real estate requires legal representation, whether it’s a notary or a lawyer you’ll need to choose someone to assist you with completion. Legal costs will include the following, lawyer service costs plus disbursements (additional costs for preparing, researching, and conducting a title search, etc...) Typically on an average single-family home, the costs will range from $1000 to $1500. They could vary based on the size of the property; or the lender charges to arrange and register the mortgage; as well as the complexity of the title transfer process. They will be the ones to draft up a statement of adjustments for you, in which you will know how much money is due upon completion and what the exact closing costs are to complete. In the case that something goes wrong, they will be your representation to ensure things are smoothed out. Ann & Julia will get you 3 quotes from a lawyer/notary for you to choose from.

GST (Goods & Services Tax)

This Canada-wide tax is not charged on resale homes, however, it is charged on new builds. GST is 5% added to the Purchase Price – there are some rebates available depending on the Purchase Price.

Other Expenses To Consider

Along with all of the above, you should also consider several other expenses that are going to come into play. Moving expenses, repairs, or enhancements to your purchased property may need to be done. Utility account set-up costs, property tax, and condo fee adjustments may also be required. The fee adjustments are payable when the seller has already paid beyond the possession date and wants to be reimbursed for that portion of their expenses).

Is this all a bit overwhelming? It shouldn't be. Give me a call and we can talk about the process and all of the costs that will be involved when you decide to purchase a property.