STEP 1

Step 1: Make sure you are financially ready.

The Canadian Mortgage and Housing Corporation (http://www.cmhc-schl.gc.ca/en/co/buho/hostst/hostst_002.cfm. ) has some great tools and information to help calculate your financial readiness.

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 (http://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 is5% 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 tohave 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.