How much will the new home really cost?

August 1, 2017

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.

 

Up Front Costs:

You will need to plan to cover the many up-front costs of buying a home. Timing is important to
help make sure things go smoothly.

    • Mortgage Loan Insurance Application Fee and Premium. If yours is a high ratio mortgage (less than 25% down payment), you may need mortgage loan insurance. To get this insurance, you may be asked to pay the required application fee. Your lender may add the mortgage insurance premium to your mortgage or ask you to pay it in full upon closing.
    • Appraisal Fee. Your mortgage lender may require that you appraise the property at your expense. An appraisal is an estimate of the value of the home. The cost is usually between $250 and $350 paid when you contract for those services.
    • Deposit. This is part of your down payment and must be paid when you make an Offer to Purchase. The cost varies depending on the area, but it may be up to 5% of the purchase price. If you wish to make a down payment of 5% and you give a deposit of 5%, then your down payment is considered to be made.
    • Down Payment. At least 5% of the purchase price is usually required for a high-ratio mortgage, and at least 25% of the purchase price is usually required for a conventional mortgage.
    • Estoppel Certificate Fee. This applies if you are buying a condominium or strata unit and could cost up to $100. (Not applicable in Quebec)
    • Home Inspection Fee. Remember that this may be a condition of your Offer to Purchase. A home inspection is a report on the condition of the home and may cost over $200, depending on the complexities of the inspection. For example, it may be more costly to inspect a home that has large square footage, one that is expensive or one where contaminants such as pyrite, radon gas or urea-formaldehyde are suspected.
    • Land Registration Fees. You may have to pay this provincial or municipal charge upon closing in some provinces. The cost is a percentage of the property’s purchase price and may vary. Check with your lawyer/notary to see what the current rates are. (Sometimes called a Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchases Tax)
    • Prepaid Property Taxes and Utility Bills. To reimburse the vendor for pre-paid costs such as property taxes, filling the oil tank, etc.
    • Property Insurance. The mortgage lender requires this because the home is security for the mortgage. This insurance covers the cost of replacing the structure of your home and its contents. Property insurance must be in place on the closing day.
    • Survey or Certificate of Location Cost. The mortgage lender may ask for an up-to-date survey or certificate of the location before finalizing the mortgage loan. If the seller does not have one or does not agree to get one, you will have to pay for it yourself. It can cost in the $1,000 to $2,000 range.
    • Water Quality Inspection. If the home has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is potable. You can negotiate these costs with the vendor and list them in your Offer to Purchase.
    • Legal Fees and Disbursements. Must be paid upon closing and cost a minimum of $500 (plus
    • GST/HST).Your lawyer/notary will also bill you direct costs to check on the legal status of your property.
    • Title Insurance. Your lender or lawyer/notary may suggest title insurance to cover loss caused by defects of title to the property.

Source: This article has been provided by a mortgage brokerage firm for its representative brokers. Inquiries: editor@adviceon.com  

 

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