cost…the forgotten part of buying a property
Buying a home costs more
than the offer you make. There are numerous other expenses that will
add to the amount that you'll need to spend. This purchase price
checklist outlines all the costs you can expect. Please note that they
can vary and are subject to change
The starting point in
your calculation... if you're like most first-time homebuyers, you'll
need a mortgage for the majority of this!
Although fees vary across
the province, it can cost you up to $2,500 depending upon whether you
are re-mortgaging your existing home or buying new.
Land Transfer Tax
A tax payable to the
Provincial Government by the purchaser upon the transfer of title from
a seller. This amount is usually not expected by most homeowners. It
can be sizeable. is generally a percentage of your purchase price?
Fees paid to the
provincial government for recording a title transfer, mortgage
registration or other instrument such as an Assignment or Lien with the
High Ratio Insurance
be purchased if you are buying a home for less than 25% down. A sliding
fee scale applies, depending on the percentage of the purchase price
required in a first mortgage (some minor exceptions). For example, as
of May1997 Canada Mortgage and Housing Corporation (CMHC) and its
competitor GE Capital charge a 2.5% one-time fee — which can be added to
the mortgage — for any mortgage over 85% — 90% of the purchase price.
Obtained by your lawyer
at the time of sale to confirm that local taxes have been paid up to
date. If they are not up to date, the seller is required to pay them
from the proceeds of the sale. If there are insufficient proceeds, then
you may be legally required to pay the outstanding taxes. If, on the
other hand, taxes have been prepaid, you may have to compensate the
seller for them.
Provincial "New Home Warranty Program"
premiums — New Homes Only!
A third party
(provincial) warranty program between a builder and a buyer.
Membership in such a
program is voluntary for the builder. Through these programs, your home
is guaranteed against defects for at least one year. All homes with a
high-ratio insured mortgage (greater than 75% loan to value) must be
enrolled in such a program.
Mortgage Appraisal and Application Fees
Application fees apply on
high ratio mortgages only while appraisal fees are common to most
mortgages Generally $150 — $240 each would apply
A report commissioned by
a property owner or purchaser, usually to verify the condition of a
property prior to the"firming up" of a purchase agreement. The scope
and detail may vary, but most reports outline any particular
problems and associated
repair costs. Unfortunately, no licensing is required, and this service
is not specifically regulated other than by general consumer protection
legislation. The best safeguard against inadequate work is to ask for
the resume of the Inspector, or select a name firm who stands by their
The legal written and/or
mapped description of the location and dimensions of your land. The
survey should also show the dimensions and placement on the lot of any
structure, including additions such as pools, sheds and fences. A lender
as part of the mortgage transaction often requires an up-to-date survey.
New to Canadian consumers
over the last few years is the introduction of title insurance into the
home buying process. Title insurance can be purchased by homebuyers to
protect against potential deficiencies in a number of areas, such as
the land survey. There are numerous benefits to this product, and you
should consult your lawyer.
Some local utility
companies (hydro, gas, oil) charge a fee on closing to connect new
buyers up to their service. More common, however, is an extra charge on
the first billing.
Property Tax and Prepaid Utilities
the previous owner prepaid property taxes or other utilities, they will
be credited the prepaid portion on closing. If they paid all their
taxes by April, expect a large adjustment cost on closing!
Interest Adjustment (IA)
you arrange to make your mortgage payments monthly on the first day of
the month, and your transaction closes after the first day of the
month, your lender will charge you interest on closing to the next
interest date, called the Interest Adjustment Date (IAD),
when your payment cycle will commence. This can be a sizeable amount,
but it is the correct interest you should pay. For example, close on
June 15th, pay 15 days interest on closing and start payments
on August 1st.
Every issue I provide
information that will help you understand the process of acquiring a
mortgage, I hope you have found this months offering of interest. Please drop by my web site at www.mortgagemaster,ca
See you next issue!