What are the costs you should consider when buying a home?
The downpayment is usually the largest cost associated with buying a house. This could be as low as 5% of the purchase price and as much as 20%-25%. The higher the down payment, the lower the Mortgage Insurance costs. Organizations like the Canadian Mortgage and Housing Corp (CMHC) charge a percentage of the purchase price for high ratio mortgages as an insurance policy for the bank against the possible default on your payments or even foreclosure. High ratio mortgages are defined as any mortgage where the loan amount is greater than 80% of the purchase price of the home. In other words, you're providing less than a 20% down payment.
Closing costs are the next item to consider. The Provincial Property Transfer Tax (PTT) is the next big expense. This unpopular tax is charged at 1% of the 1st $200,000 of purchase price and 2% of the balance up to $2,000,000 and 3% above that. So for example a Purchase of $500,000 would be subject to $8000.00 in Transfer Tax. This tax is exempt for First Time Homebuyers and The Province did make a change and remove this tax for New Home Purchases. So the PPT is not a factor when buying new which is definitely something to keep in mind.
Speaking of New Homes, a rather large expense to consider will be the GST. Typically 5% of the purchase price.
The next item is a Lawyer or Notary Public handling the conveyancing for you typically charge $950.00 to $1300.00 for a purchase transaction. This is to cover registration of title and legal work for the mortgage papers.
This may all seem a bit overwhelming but investing in Real Estate is really the foundation for long term wealth and you will never regret the decision to purchase your first home.
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The Best Homes on Earth Team