Costs Involved in Buying
CALCULATE WHAT YOU CAN AFFORD
Before you start looking for your dream home, determine how big you can dream. Assessing a realistic budget is the first and most important step in buying a home.
COSTS OF BUYING A HOME
One times costs
- Down payment
- Legal fees
- Title insurance
- Inspection fees
- Land transfer tax
- Mortgage payments
- Property taxes
- Maintenance fees
- Home owners insurance
SELL YOUR CURRENT HOME
Buy or sell first? Many people are able to time the sale and purchase of their homes so they happen on the same “closing date”. As a buyer, you can make your offer “conditional” on the sale of your existing home, ensuring that you are not paying for the upkeep of two homes. Alternatively, when selling, you can attempt to extend the “closing period” to allow yourself sufficient time to locate your next property.
ARRANGE A MORTGAGE
A mortgage provides you with the funds to finance your real estate purchase. Your Bank or Mortgage Broker can assist you in determining how much debt you can service.
FIND A REALTOR WHO’S RIGHT FOR YOU
Realtors aren’t just people who help find you a home. You are entrusting a Realtor with your most valuable possession, your home. Choose wisely.
MAKE AN OFFER
You’ve found a home? Your Realtor will assist you in submitting an offer to purchase. Realtors will prepare, present and negotiate the offer on your behalf to the listing brokerage.
FIND A HOME INSPECTOR
When you’re buying a home, you’ll want to scrutinize every last detail. A home inspection prior to ‘firming up’ your offer is money well spent. A thorough inspection can save you from unpleasant surprises and costly repairs.
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BUYER: That’s you.
SELLER OR VENDOR: The present owners.
PURCHASE PRICE: The most important number. Let’s hope the seller goes for it!
DEPOSIT: A down payment you present to the Seller or the Seller’s brokerage. The amount of the deposit is up to you, but there are guidelines that are standard in the industry.
CHATTELS INCLUDED AND FIXTURES: Be sure you know what is included with the house – the washer and dryer, the microwave, draperies, light fixtures. Don’t leave anything to ‘chance’.
IRREVOCABILITY OF THE OFFER: The length of time you give the seller to consider your offer. Usually less than 48 hours.
COMPLETION DATE: The date you take possession! Often 30-90 days after the Agreement of Purchase and Sale is signed by both parties.
CLAUSES PARTICULAR TO THIS AGREEMENT: Every transaction is unique, and you may want to add specific conditions that are important to you, such as a proper home inspection. Your Realtor can help ensure no details are overlooked in your offer.
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Costs Involved In Buying A Home
Some mortgage lenders charge a fee to process your application. Ask if it can be waived.
Your mortgage lender may need to have your new home appraised by a professional and they often pass the bill onto you. Sometimes your lender will also waive this fee.
Your mortgage broker may charge a fee that’s payable on your closing date. Ask your broker to avoid surprises.
Lenders may require a survey of your property. Get your lawyer on the case.
A home inspection is essential. This is money well spent.
Mortgage lenders require you to carry fire and extended-coverage insurance.
It is not mandatory, but title insurance protects you from fraud and potential errors surrounding the title to your land. Ask your lawyer for details.
You will pay your lawyer for their invaluable time and “disbursements”, which are the costs involved in title searches, drawing up the title deed, and preparing your mortgage.
The previous owner may have paid property tax or utilities in advance and they want to be credited for those payments. Ask your Realtor and lawyer what might come up on the closing date.
MAINTENANCE AND UTILITY
Remember, you will now have more regular monthly payments in the form of property tax and utilities.
PROPERTY LAND TRANSFER TAX
The amount of this tax varies from province to province. Properties in Toronto attract Municipal Land Transfer Tax, as well as Provincial Land Transfer Tax.
Refers to the length of time the bank has agreed to lend you the money – typically from six months to five years. At the end of the term, you can generally renegotiate a new term.
The length of time it will take to pay off the whole mortgage. The longer the amortization period, the lower your monthly payments, but the more interest you will pay over the term.
Interest is the cost of borrowing money, calculated annually. Using a mortgage calculator, you can determine your monthly payments based on the mortgage amount required.
SIZE OF THE DOWN-PAYMENT
You want as small a mortgage as possible, which means making the biggest down payment possible. Down payments of less than 20% will attract an additional expense of mortgage default insurance.
FIRST TIME HOME BUYERS
If you’re a first-e time homebuyer with money in an RRSP, you can withdraw up to $25,000 without paying any income tax. If your spouse is also eligible, that’s $50,000.
FIXED VERSUS VARIABLE RATE
If you choose a variable interest rate, you may be paying a fluctuating interest rate throughout the term of your mortgage. Increases in the Bank of Canada’s prime lending rate determine the impact on variable rate for any given time. Fixed rate mortgages on the other hand, will give you the security of knowing exactly what your monthly payment will be for the full term of the mortgage.
DOCUMENTATION REQUIRED FOR MORTGAGE APPLICATION
- Letter of employment confirmation (including your position, your pay and your years of employment with the company)
- Notice of assessment for the past two years from Revenue Canada
- List of your assets (car, stocks, bonds, GICs, etc.)
- List your liabilities and monthly debt obligations (car payments, student loans, credit card debt, etc.)
- Social Insurance Number
- Banking account confirmation
- Lawyer’s contact information