How Much Will It Really Cost?
Once you have figured out the home price range you can afford and the type of mortgage you qualify for, you will need to calculate all of the associated costs of the transaction to make sure you are financially ready. You will need to plan ahead to cover the many up-front costs of buying a home. TIMING is important to help make sure things go smoothly:
Property Purchase Tax: The British Columbia Provincial Government imposes a property purchase tax (or Property Transfer Tax-PTT), which must be paid before any property can be legally transferred to a new owner. The tax is 1% on the first $200,000 of the property value and 2% on any value over $200,000. Some first time home buyers may qualify for PPT (or PTT) exemption.
Call me to find out about these special regulations for first time buyers in BC.
Goods and Service Tax: If you purchase a newly constructed home, you may be subject to a 6% GST on the purchase price. However, if the home is under $375,000 and this is your principal residence, a rebate will reduce the GST paid to 3.84% of the purchase price. If the home is over $375,000 the net GST to be paid increases gradually with every increase of the purchase price, up to, but not including, a price of $450,000. At $450,000 and above, you are subject to the full 6% GST.
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. Property taxes are calculated from January - December and paid at the end of June.
Appraisal Fee: When the lending institution requires an appraisal of the property before approving your loan, it may be your responsibility to pay the appraiser's fee.
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. 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. The application fee may vary between lending institutions.
Mortgage Default Insurance: This type of insurance is required on all mortgage loans in excess of 75% of the appraised property 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 property is not sufficient to pay your mortgage debt. The insurance premium is paid to the lender and ranges from 0.5% to 3.75% of the loan value. However, in most cases this premium is added to the loan amount and paid over the term of the loan.
Life and Disability Mortgage Insurance: At your option, you may purchase insurance that will ensure that your outstanding mortgage balance is paid if you die or become disabled.
Fire and Liability Insurance: The mortgage lender will insist that you purchase an insurance policy which guarantees that in the event of a fire, the lender will receive the balance owing on the mortgage loan before you receive any insurance proceeds.
Legal Fees: The transfer of property ownership from the seller to the buyer must be recorded in the Land Title Office (LTO) 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 legal fees for this service will include payment of a registration fee. If you are financing your purchase with a new mortgage loan, there will be a further fee to purchase and register the mortgage documents.
Deposit: This is part of your down payment and must be paid when you make an offer to purchase. The deposit is usually between 5% and 10% of purchase price.
Down Payment: At least 5% of the purchase price (for a high-ratio mortgage) and at least 25% (for a conventional mortgage). |