Wednesday, June 3, 2015

Buying a home - What to expect in terms of your costs

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.

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.
(514) 771-1352   Fax : (514) 666-9166

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