cost of buying a home

Everyone assumes there are ‘hidden costs’ associated with purchasing a home. In fact, they are not ‘hidden’ at all, just poorly explained by previous agents, I would imagine. I have put together a list of costs/fees/taxes associated with purchasing a home, along with some links to more information about these costs.

The Down-payment

Lending institutions in Canada require a minimum down-payment 5% of the purchase price of the home. Having 20% or more as a downpayment can save you money, as most lenders require additional insurance be purchased if the downpayment is less than 20% Lending institution policies may vary from time to time. However, as a general rule, you should make your cash down-payment as large as possible. Your deposit for the real estate transaction may form part of your down-payment.

Property Transfer Tax (if applicable)

The British Columbia Provincial Government imposes a property transfer tax, which must be paid before any home can be legally transferred to a new owner. Some buyers may be exempt from this tax. For further information, contact the Property Transfer Tax office in Victoria at www.gov.bc.ca/sbr.

Appraisal Fee

When the lending institution requires an appraisal of the home before approving your loan, it may be your responsibility to pay the appraiser’s fee.

Mortgage Insurance

This type of insurance is required on most mortgage loans in excess of 80% of the appraised home value. Its purpose is to ensure that the lender will not lose any money if you cannot make your mortgage payments and the value of your home is not sufficient to repay your mortgage debt. 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.

Survey Fee

The lending institution may also require that a survey certificate be presented to them. The purpose of the survey is to formally establish the boundaries of the property and to ensure that all buildings are within those boundaries.

Note: Lending institutions may ask for either a building location survey, which establishes where a building is  located on a property, or a monumental survey, which establishes the actual boundaries of a property. If the current owner cannot provide a recent survey certificate, it will be your responsibility to pay the surveyor’s fee.

Mortgage Application Fee

Lending institutions may charge a mortgage application fee. This application fee may vary between lending institutions.

Life & Disability Mortgage Insurance

At your option, you may purchase insurance which will ensure that your outstanding mortgage balance is paid if you die or become disabled.

Fire & Liability Insurance

The mortgage lender will insist that you purchase an insurance policy which guarantees that, in the event of fire, the lender will receive the balance owing on the mortgage loan before you receive any insurance proceeds.

Legal Fees

The transfer of home ownership from the seller to the buyer must be recorded in the Land Title and Survey Authority Office in order to protect the new owner’s interests. You will probably want to engage a lawyer or notary public to act on your behalf during the completion of your purchase. The lawyer or notary public will charge a fee for this service, plus disbursements, including the Land Title Registration fee. If you are financing your purchase with a new mortgage loan, there will be a further fee and disbursements to prepare and register the mortgage documents.

Title Insurance

Title insurance protects the insured from title defects and survey defects.  Most lenders will accept title insurance in lieu of a survey.  For more information about title insurance, please visit the websites for some of Canada's major title insurance companies:

First Canadian Title Insurance -  www.firstcanadiantitle.com

Home Inspection (if applicable)

A good Realtor will recommend that you get a home inspection by a certified home inspector. It will cost you anywhere from $150 to $1500, depending on the size of the house or the complexity of the inspection. An inspector can lay to rest any questions or concerns you may have that are beyond your expertise as a handyman, or find latent defects that cannot be seen with the naked eye. Evaluate what an entire rainy winter full of piece of mind is worth to you- more than $500?

HST (if applicable)

On July 1, 2010, the Provincial Sales Tax (PST) and the 8% component of the Hotel Room Tax were replaced with the Harmonized Sales Tax (HST). The HST is administered by the Canada Revenue Agency. For information on the application of the HST, please visit the Canada Revenue Agency website at www.cra-arc.gc.ca/harmonization

PST Transitional New Housing Rebate

For new homes that are subject to the provincial component of the HST after June 2010, a PST Transitional New Housing Rebate is available to provide relief in respect of the PST embedded in the price of the home.

PST Transitional New Housing Rebate

Maintenance Fees

When you own a condominium in BC you will have to pay a maintenance fee (strata fee) every month. The money is used by the strata corporation to pay the expenses of the development.

Your individual strata maintenance fee is assessed by taking the total cost of the strata’s expenses and dividing that by the unit entitlement of your strata lot. The unit entitlement is related to the square footage of each strata lot.

There are two funds that every strata corporation in BC must maintain (and are funded by the maintenance fees): an operating fund and a contingency reserve fund. The operating fund is what is used to pay for common expenses that occur more than once over the course of a year. The CRF is the fund that is typically used to pay for expenses that occur less than once a year, or more unusual expenses.

Maintenance fees vary greatly from area to area and building to building. It is difficult to compare maintenance fees directly as they depend on the management style of the strata, as well as the type of amenities that are offered in the building. That being said, you will find that typical strata fees in condominium buildings in Vancouver tend to range from a low near $0.25/sq ft up to nearly $0.45/sq ft.

Property Taxes

In Canada you pay an annual property tax - much like council tax in the UK. It is assessed on the value of your property. The intention is that this is a fair market value and is based on the sale price of the house or a more recent assessment. So, increasing property prices result in higher taxes.

The assessment is carried out each year in July. The property assessment is sent out to home owners in January.

The assessed value is made up of two elements. The land value, and the improvements. Land value is usually the most significant element, so don’t be surprised if you see that. The improvements are the buildings on the land. This is your home.

Utilities (Electricity/Hot Water/Heat/Cable/Gas)

If you plan on actually living in your new home, these are some of the services you will want to contact as soon as possible in order to not have issues on possession day.

BC Hydro

Shaw Cable

Telus

Terasen Gas

Move in/out fee

Often in strata operated buildings, there will be a non-refundable move-in/out fee. Most people see this as a cash grab for the strata corporation, but in reality it just goes into the operating fund and ends up being used for building maintenance and upkeep.

Moving Expenses

This is pretty straight forward. Just make sure you have room in your budget for expenses such as movers, moving trucks, boxes and packing supplies, paint, etc. They can add up real fast.