Understanding the Costs of Buying a Home
First-time Home Buyer Knowledge Base
When you buy a home, you enter a new world. Some of the costs associated with home ownership are onetime expenses. Others are ongoing. The typical renter has been sheltered from the ongoing costs of homeownership. The landlord takes care of these expenses.
Now, as you consider the biggest investment of your life, it’s important to understand all of the costs that are involved. Doing so will make the purchasing process much less stressful.
Here are the typical costs involved in purchasing a home.
Lawyer Fees
No matter how straightforward your home purchase appears to be, you will need a lawyer or notary on private deals. The lawyer also searches the title, draws up mortgage documents and registers a loan with the land titles office. The lawyer will also act as an escrow agent at closing.
Typical notary’s fees range around $750-950. Lawyer fees are around $100-200. They can be higher or lower.
Title Insurance Fees
While not all lenders require you to take out title insurance, it’s a very good practice. It’s possible to lose your home due to title and survey defects and you could also be the victim of fraud or forgery. Title insurance protects you against this.
Broker Fees
At GMC mortgage, our brokers will not charge you any fees for their services on most 99% of first mortgages, some conditions apply. There may be a fee involved in searching for a second mortgage. Any fees involved will be disclosed in advance before you sign any mortgage agreement.
CMHC / GE Capital Insurance
Borrowers who have less than a 20% down payment always have to pay mortgage default insurance. There are three sources of this type of insurance available in Canada—CMHC, Genworth, and CG (Canada Guaranty). Either provider gives you a policy which protects the lender in case you default on your mortgage.
This type of insurance can range anywhere from 0.5% to 2.75% of the total amount you’re borrowing. You will have to pay an application fee which varies from $75 to $235. A visit to CMHC’s or Genworth’s website will enable you to get an accurate calculation of the costs.
Appraisal Cost
When a loan is backed by CMHC, Genworth, or CG, the lender may waive the appraisal. Otherwise you can expect to pay from $250 and up for an appraisal. Size and location of the property is a factor in the appraisal fee. While some lenders will pay this expense, expect to pay this fee out of your own pocket.
Home Inspection Cost
Never consider buying a home without having it inspected by a qualified home inspector. It could save you from making a bad investment. In British Columbia, home inspectors must be licensed. You can confirm that the inspector you want to hire is licensed by using Consumer Protection BC’s Home Inspectors Search.
Pricing is usually based on the square footage of the house, with the potential of additional fees for inspecting the crawlspace or inspecting older homes. Mileage may be added to the fee as well. Typical fees range from $250 to $450 for a home priced below $400,000.
Property Taxes
Property taxes are annual fees and are due on July 2nd. Some lenders require the tax to be included as part of the mortgage payment to ensure your taxes are paid each year or you may be required to pay a monthly installment to the city using the Tax Installment Payment Plan (TIPP).
Strata Fees
This is another ongoing fee. Most strata corporations charge a fee that covers maintenance of the common areas shared by everyone who owns a unit in the complex. The averages in British Columbia are from $200 to $600/month. They can be higher, so this is valuable information to know before you agree to purchase a condominium.
Strata Form B
The realtor will provide this on purchase. The cost to clients will happen on refinance. It usually costs about $50 to secure an estoppel certificate from the condominium you are interested in buying into. This is an important document for many lenders, as it gives the lender the ability to evaluate the financial and legal status of the condominium.
Survey
You want to avoid a new survey if at all possible. It costs $500 or more. Ask the seller to provide the previous survey as a condition of purchase. Occasionally, title insurance may be accepted by the lender in lieu of an up-to-date survey. Expect to pay for a survey when you go to sell the home if you aren’t able to get one at the time of purchase.
