STEP THREE: How Much will it Really Cost? total cost
Once you have figured out the home price range you can afford and the type of mortgage you qualify for, you will need to calculate all of the associated costs of the transaction to make sure you are financially ready.
You will need to plan ahead to cover the many up-front costs of buying a home. Timing is important to help make sure things go smoothly.
Mortgage Loan Insurance Premium
If yours is a high ratio mortgage (less than 20% down payment), you may need mortgage loan insurance. To get this insurance, you will be asked to pay the required insurance premium. Your lender may add the mortgage insurance premium to your mortgage or ask you to pay it in full upon closing. (Refer to Step 2 for details) total cost
Your mortgage lender may require that the property be appraised at your expense. An appraisal is an estimate of the value of the home. The cost is usually between $250 and $350 and must be paid when you contract for those services. (Refer to Step 5 for details.)
This is part of your down payment and must be paid when you make an Offer to Purchase. The cost varies depending on the area, but it may be up to 5% of the purchase price. If you wish to make a down payment of 5% and you give a deposit of 5%, then your down payment is considered to be made.
At least 5% of the purchase price is usually required for a high-ratio mortgage and at least 20% of the purchase price is usually required for a conventional mortgage. total cost
Estoppel Certificate Fee (not applicable in Quebec)
This applies if you are buying a condominium or strata unit and could cost up to $100.
Home Inspection Fee
Remember that this may be a condition of your Offer to Purchase. A home inspection is a report on the condition of the home and may cost over $200, depending on the complexities of the inspection. For example, it may be more costly to inspect a home that has large square footage, one that is expensive or one where contaminants such as pyrite, radon gas or urea-formaldehyde are suspected. (Refer to Step 5 for details.) total cost
Land Registration Fees (sometimes called a Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchases Tax)
You may have to pay this provincial or municipal charge upon closing in some provinces. The cost is a percentage of the property's purchase price and may vary. Check with your lawyer/notary to see what the current rates are.
Prepaid Property Taxes and/or Utility Bills
To reimburse the vendor for pre-paid costs such as property taxes, filling the oil tank, etc.
Property Insurance total cost
The mortgage lender requires this because the home is security for the mortgage. This insurance covers the cost of replacing the structure of your home and its contents. Property insurance must be in place on closing day. (Refer to Step 5 for details.)
Survey or Certificate of Location Cost
The mortgage lender may ask for an up-to-date survey or certificate of location prior to finalizing the mortgage loan. If the seller does not have one or does not agree to get one, you will have to pay for it yourself. It can cost in the $1,000 to $2,000 range.
Water Quality Inspection
If the home has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is potable. You can negotiate these costs with the vendor and list them in your Offer to Purchase.
Legal Fees and Disbursements
Must be paid upon closing and cost a minimum of $500 (plus GST/HST).Your lawyer/notary will also bill you direct costs to check on the legal status of your property. (Refer to Step 5 for details.)
Title Insurance total cost
Your lender or lawyer/notary may suggest title insurance to cover loss caused by defects of title to the property. If you feel you cannot cover all of the up-front costs, you can ask your lender for a loan. Remember that payment for this loan amount, based on a 12-month repayment period, will have to be included in your Total Debt Service ratio calculation.
Besides up-front costs, there are other expenses to consider:
1. Appliances. Check to see what comes with the house, if anything.
2. Gardening equipment.
3. Snow-clearing equipment.
4. Window treatments. Check to see what comes with the house.
5. Decorating materials. Paint, wallpaper, flooring and tools for redecorating.
6. Hand tools. You will need some basic hand tools for your new home.
7. Dehumidifier. May be required to control moisture levels, especially in older homes. total cost
8. Moving Expenses.
9. Renovations or Repairs.
10. Service Hook-Up Fees. Charged for utilities. You may be required to pay a deposit for utilities such as telephone and heating services.
11. Condominium Fees. You may have to make the initial payment for these monthly fees.
I'm Always Here to Help
If you have questions about up-to-date market conditions, would like to get my Price Analysis, or simply would like to know what that home next door is listed for... I'm always available to provide that information.
Perhaps you are considering a sale, but are just not sure what would be the best way to proceed in this changing market.
Or maybe you are the First Time Buyer, excited to enter the Housing Market, and have more questions than your would like to handle on your own...
Please give me a call at 705-718-3166
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