Most of my clients are uneducated in terms of the costs
involved when buying their first house. Many of them believe that once you have
the down payment, you are all set. Not knowing these costs can frustrate buyers
because they don’t realize that they are necessary in the buying process. In
the next few paragraphs, I will outline a few of the costs associated with your
purchase so you can be prepared.
Building
Inspector
Most people try and find the cheapest building
inspector they can find. Most building inspectors cost at least $300-350
depending on the size of the property.
Some inspectors can cost over $500. What
is important to remember is to not be penny-wise but pound foolish. If you pay
an inspector $50 more, but he finds a defect in the house like a crack in the
foundation, you will be more than happy to pay it. A crack in the foundation
can lead to hundreds if not thousands of dollars of unwanted repairs, and even
lawsuits to recoup the money for repairs.
Appraisal
Most of the time, a bank will cover the cost of the
appraisal up front, while some ask you to pay for it and then reimburse you.
Please make sure to get this information up front since different lending
institutions work in different ways. Usually, an appraisal will cost $300, and
most banks will cover it. If you are trying to get a loan through an
alternative lender, the cost is always at the expense of the client.
Provincial sales
tax on CMHC Premium
When you buy a home with less than 20% down, you have to
pay an insurance premium. If you put 10% down, for example, on a purchase of
$200,000 your mortgage will be $180,000. Once you add the 2% premium, the new
mortgage amount will be $183,600 with the $3600 insurance premium. There
is a 9% provincial tax on the $3600, making the total amount $3924. This $324
of tax must be paid when the loan is at the notary. It cannot be added onto the
loan.
Notarial Costs
When you secure a mortgage on a home, it must be
registered with the land registry office by an accredited notary. This
professional’s job is to make sure that they verify that the property’s new
mortgage is registered properly, to verify that the title is clean, as well as
verify the certificate of location. They make sure that the buyers have the
proper documentation with them at the closing to make sure that the transaction
goes smoothly. Typically, for a home purchase, a notary will cost anywhere
between $1,050 and $1,400. Once again, it is important to use a notary that you
trust is competent, because a bad notary can wreak havoc on an otherwise
straight-forward transaction. If you refinance a property, the fees are usually
cheaper, but it depends from one notary to the next.
As always, should you have any questions regarding costs,
or the mortgage process in general, please let me know. Anything I can do to
educate you, or make the process easier, it would be a pleasure.
www.mortgageratesmontreal.com
(514) 771-1352 Fax : (514) 666-9166
info@mortgageratesmontreal.com
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