Q: WHAT ARE THE STEPS INVOLVED IN PURCHASING A NEW PROPERTY?
Step 1: Make sure you are financially ready.
Step 2: Consider what you want and what you need in a property.
Step 3. Select and Consult with a Realtor.
Step 4: Choose a Mortgage Broker or Lender.
Step 5: Look at Desired Properties until one fits.
Step 6. Make an offer and complete negotiation.
Step 7. Satisfy the Subjects/Conditions of the Contract.
Step 8. Choose a Lawyer or Notary.
Step 9. Sign the Final Papers.
Step 10. Take Possession of Your New Home!
WHAT IS THE PRIVATE CLIENT SERVICE (PCS) AND HOW DO I SIGN UP?
Jim offer a no obligation registration to their Private Client Service (PCS) through email. This tool allows buyers to program their search criteria so when a new property is listed on the local Multiple Listing System (MLS) that fits the criteria, the buyers will receive an email alert. If the property is of interest, all you have to do is email or call Jim to request a viewing. This is a great way to get first shot at properties that hit the “hot sheet”. Some buyers also choose to participate while they are saving their down-payments so they can keep an eye on the market. To subscribe to this list, please contact us through email or phone and we would be happy to help!
HOW MUCH CAN I AFFORD? WHAT ARE THE HIDDEN COSTS ASSOCIATED WITH BUYING A PROPERTY?
The Canadian Mortgage and Housing Corporation has some great tools and information to help calculate your financial readiness.Click Here
The purchase price of a house is only one part of the overall cost involved in acquiring a new property. Prior to close, you may also need to plan to pay for the following:
- House Inspection
- Well water and/or Septic Inspection if you are buying a rural property
- Appraisal Fee – some lenders will require an independent assessment of the property value prior to approving the mortgage; this is often required on high-ratio mortgages when the down payment makes up a smaller percentage of the purchase price.
- Survey Fee – Most lenders will want to see a plot plan or survey of the property to establish exactly where the boundaries are and make sure there are no encroachments such as part of your neighbour’s house or garage sitting on your land. Luckily, many sellers can provide this information through their realtor but if not, it is usually the buyer’s responsibility to pay the surveyor’s fee.
- Mortgage Application Fee – some lenders, particularly large financial institutions, will require a mortgage application fee to be paid
- Property Transfer Tax – The B.C government imposes a property transfer tax before any property can legally be transferred to a new owner. This is calculated on the property’s purchase price at the rate of one per cent up to $200,000 and two per cent of the price over $200,000. First-time buyers may be exempt from this tax subject to certain restrictions. Click here for more information www.rev.gov.bc.ca/business/Property_Taxes/Property_Transfer_Tax/first_Time_home_buyer.htm
- Goods & Sales Tax (GST) – If you purchase a newly constructed home, you may be subject to 5% GST on the purchase price.
- Property Tax – If the current owners have already paid the full year’s property taxes to the municipality, you will have to reimburse them for your share of the year’s taxes during conveyancing.
Mortgage Default Insurance – If you are applying for a high-ratio mortgage – that is, if you are borrowing more than 80 per cent of your home’s purchase price – you will have to pay for mortgage insurance to protect the lender in the event that you fail to make the necessary payments. The insurance premium is paid to the lender and, in most cases, is added to the loan amount and paid for over the term of the loan. The cost is significant – for example, if your down payment is 5% on a $350,000 house, at the current rate of 2.75%, your mortgage insurance would be $9144. However, if you put 10% down on the same house, you would pay 2%, equalling $6300. Common mortgage default insurance providers include CMHC and Gemworth.
- Fire & Liability Home Insurance – your lender will require your new home to have active fire and liability insurance prior to possession. The insurance can usually be paid in an annual lump sum or through monthly payments if you prefer. Depending on what additional coverage you choose and your claim history, local house insurance usually costs around $60-100 a month.
- Legal Fees & Disbursements – These are the fees charged by a lawyer/notary to help you complete the home-buying process. Disbursements are the costs involved in processes such as conducting a title search, drawing up the title deed and preparing and registering the mortgage. You will need to plan for $800-1200 for this service.
In addition, you may need to set aside money for the following during your transition to a new place:
- Moving Costs – van and crew rentals, packing materials, transfer of mail and utilities
- Renovations and Decorating – you may decide your new place needs paint, updated lighting fixtures, flooring etc. Don’t forget about window coverings, rugs and other new décor.
- Appliances – If not part of the sale, you may need to purchase appliances and have them delivered
Tools and Equipment for Outdoor Maintenance – if this is your first home, you may need to purchase equipment such as a lawn mower, garden hose, rake etc
This list may not include everything required but will give you a good head start on what to expect as you plan financially for your upcoming purchase.
WHAT ELSE DO I NEED TO KNOW AS A FIRST TIME HOME BUYER?
There is a lot to learn as a First Time Home buyer and it is important to ask lots of questions when there is something you don’t understand. Your realtor and mortgage broker will play a large role in building your confidence through the process. Remember, they are both there to represent and support you. They don’t work for anyone else but you and it’s in everyone’s best interest to make the transaction go smoothly.
One thing special to first time buyers is all the incentives offered by the Canadian Federal and BC Provincial Government to help make getting the first home a reality. The current programs include:
- Home Buyer’s Plan – The ability to cash out RRSPs up to a certain threshold without short-term penalty to put towards a down-payment. This program is run by Revenue Canada www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap
- Property Transfer Tax Exemption – precludes First Time Buyers from paying Property Transfer Tax provided your property meets certain specifications. The BC Ministry of Finance will have the most up to date information on this program. sbr.gov.bc.ca/individual.html
- First Time Buyer’s Tax Credit – buyers can currently claim a $5000 tax credit through Canada’s Economic Action Plan initiative. The most up to date information on this program can be found here actionplan.gc.ca/en/initiative/first-time-home-buyers-tax-credit
Talk to your support team – realtor, mortgage broker, lawyer to check your eligibility and take advantage of these benefits. Keep your eye on new Federal and Provincial budgets and programs for changes and new offers.