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When thinking of buying a home, Its really important to know all of the costs you could incur on top of the purchase price of a home. This way you can properly calculate your out of pocket expenses and ensure you have the proper savings in hand to have everything go smoothly with your purchase and not stretch yourself too thin.
I’ve outlined these up-front costs below:
Down Payment. Banks and lenders usually require 20% down payment for your conventional mortgage. You can put as little as 5% down, but you will need to have mortgage loan insurance through CMHC or Genworth which adds additional costs to your mortgage amount. This can vary for certain property types and investment properties.
Deposit. This can be used from part of your downpayment, but must be paid when you sign a final offer of purchase and sale. This is usually to the amount of 5% of the purchase price.
Mortgage Loan Insurance Premium. (CMHC) For high ratio mortgages, your lender may need mortgage loan insurance and may add the premium to your mortgage or ask you to pay this in full upon closing. This is not required if you are providing a down payment of over 20%.
Appraisal Fee. Your lender may require you to have an appraisal done on a property at your expense before they approve financing. Some lenders will incur the costs on this, but not all do. This can cost between $250 and $350 and needs to be paid when the service is contracted.
Home Inspection. I always suggest a building inspection to my clients as a condition/subject in the contract of purchase and sale. This provides the buyer with a report on the condition of the home and can expose any unseen damage or possibly future issues that may be present or become present in the home. This generally costs around $350 (+GST), but can be more depending on the size and complexity of the inspection.
Property Purchase Tax (PPT). (Also called Land Registration Fees or Land Transfer Tax) In BC, you are charged tax when transferring ownership of a property. This is a percentage of the purchase price. You can check with your lawyer/notary as the the current rates.
Pre-paid property taxes or utility bills. You will need to reimburse the seller/vendor for any pre-paid property taxes that may have already paid. You also may be required to pay for any utilities that have been paid in advance (i.e. In an older home with an oil furnace, you may need to pay the vendor if they’ve recently refilled it)
Property insurance. Your mortgage lender will require this as the home is the security for the mortgage and will cover the cost of replacement of the structure and its contents should something happen. This must be in place at the time of closing.
Legal Fees and Disbursements. This must be paid on closing to cover the transfer of the title and monies by a lawyer or notary public. This will be billed directly from your lawyer/notary and generally costs around $1000-$1300. This also includes having your lawyer/notary check the legal status of the property.
Survey Certificate. Your lender may ask for an up to date survey certificate before finalizing your mortgage. If the seller doesn’t have one or agree to get one then you will be on the hook to pay for this. This can cost between $1000 and $2000.
Title Insurance. This may be suggested to you by your lawyer/notary to cover any loss that may be caused by defects of the title of the property. If you have a survey certificate done then this would not likely be suggested, but is a cheaper alternative to getting one done.
Water Quality Inspection. This would be a must when looking at properties who’s water supply is from a spring or well. This will ensure your water is potable and that the supply is adequate to support the demand from the home/buildings and use of the land. This could possibly negotiated for the seller to cover the cost of this, but if they are not willing, then you will have to pay for this. Costs for these tests vary.
Other costs you may want to consider, and that a home may need as well are:
- Moving Costs
- Window treatments
- Possible renovations or updates
- new appliances
- Service hook up fees
- Decorating materials (paint, etc.)
So as you can see when buying a home, you could be looking at a fair bit more than just the purchase price of your home so you need to be prepared. You are not always going to be looking at all of these, but its an outline of what you can possibly encounter. It is important to consider all of them costs so you can help make the process as smooth as possible when the time comes and you don’t run in to any unexpected expenses that can make things stressful.
Hope that brings some things to light for you, and as always, I am here and happy to answer any of your questions. Feel free to email me at email@example.com