When planning to buy a home, it’s crucial to budget for all associated costs, not just the down payment. Here's a breakdown to ensure you're fully prepared:
The Costs to Buy a Home
1. Closing Costs: These are one-time fees that must be paid when finalizing your home purchase. They typically range from 3%-4% of the purchase price.
Legal fees, cost of adjustments, out of pocket fees, etc.
Land title and mortgage filing fees.
Home inspection fees.
Property Appraisal fees.
Property Transfer Tax (varies by province; see BC below )
In British Columbia, the Property Transfer Tax (PTT) is a one-time fee paid by the buyer during the transfer of real estate. It's essential to factor this tax into your home-buying budget
Tax break: The first time home buyers' program reduces or eliminates the amount of property transfer tax you pay on your first home. See below and learn more here.
GST
When purchasing a home in Canada, the Goods and Services Tax (GST) is applicable to new homes. However, there are some reliefs available for first-time homebuyers.
Tax break: See below and learn more here.
2. Professional Services: Buying a home is a collaborative effort. You’ll need support from:
Real Estate Agent: Helps find the right property, purchase price, and guides you through the process.
Lawyer or Notary: Handles legal paperwork, title searches, and ensures the property transfer is completed correctly.
Home Inspector: Provides a detailed assessment of the property’s condition, identifying potential issues.
3. Additional Costs:
Life insurance: Lenders usually require this. Work with me protect what matters most !
Deposit: Typically 5%-10% of the purchase price often paid when making an offer.
Moving Expenses: Truck rentals, movers, or supplies for a DIY move. Don’t forget your change of address and forwarding details.
Utility Setup: Deposits or connection fees for utilities like hydro, water, gas, internet, etc.
Strata fees: See insert below.
Tools You Can Use
Loan-to-Value Calculator: Estimate the mortgage type and size you’ll need.
Closing Cost Calculator: Budget for 3%-4% of the purchase price in one-time fees.
Understanding Down Payments in Canada
Avoid surprises and be ready to enjoy your new home stress-free.
Less than 20% Down (Insured Mortgage):
What It Means:
Requires Mortgage Default Insurance through CMHC, Sagen, or Canada Guaranty.
Insurance protects lenders from “default risk”, the risk of you not making payments.
Your premium is calculated as a percentage of the amount borrowed.
(This is different than Life or Mortgage Insurance due to death.)
Costs & Benefits:
With 5% down, you’ll pay the highest Mortgage Default Insurance premiums.
10% down significantly reduces the premium rate.
20% or More Down (Uninsured Mortgage):
What It Means:
Mortgage Default Insurance is not required!
Typically qualifies for better interest rates.
Tip: A higher down payment often saves money over the life of your loan.
Check out the Changes in 2024
Longer Mortgages
As of December 15, 2024, all first-time home buyers in Canada will be able to extend their mortgage amortization period to 30 years from the previous maximum of 25, regardless of whether they are an insured or uninsured borrower.
Higher Insured Mortgage Cap
In addition to longer amortization periods, the government will also increase the limit for insured mortgages. Starting December 15, 2024, the insured mortgage cap will rise from $1 million to $1.5 million.
The extension of insured mortgage amortizations and the increase in the mortgage insurance cap will give many first-time buyers a much-needed boost in accessing the housing market.
What This Means for You:
Plan Your Down Payment Strategically:
Use tools like the loan-to-value calculator to explore mortgage options.
Save and budget for premiums, closing costs, and insurance impact.
Choose bi-weekly or accelerated bi-weekly payments NOT monthly.
Ask the Right Questions
Before making an offer, always ask for the following information:
Monthly strata fees and what they cover.
A copy of the building’s financial statements (reserve fund balance, budget, etc.).
Any special assessments or upcoming fee increases.
By understanding the strata fees and how they fit into your overall homeownership costs, you can make an informed decision before buying.
Start Today:
Now that you understand more about the costs, why not meet with me?
Take the first step toward financial freedom by booking an online or in-person appointment. Together, we’ll create a plan to help you get into your home!
For detail enthusiasts PTT, GST & Strata Fees
Property Transfer Tax (PTT)
In British Columbia, the Property Transfer Tax (PTT) is a one-time fee paid by the buyer during the transfer of real estate. It's essential to factor this tax into your home-buying budget.
PTT Rates:
1% on the first $200,000 of the property's fair market value.
2% on the portion between $200,001 and $2,000,000.
3% on the portion between $2,000,001 and $3,000,000.
Additional 2% on the portion exceeding $3,000,000 for residential properties.
Example Calculation:
For a property valued at $1,000,000:
1% of $200,000 = $2,000
2% of $800,000 = $16,000
Total PTT = $18,000
Exemptions:
First-Time Home Buyers' Program: Full or partial exemption for qualifying first-time buyers on properties valued up to $500,000, with a partial exemption up to $525,000.
Newly Built Home Exemption: Exemption for newly built homes valued up to $750,000, with a partial exemption up to $800,000.
Note: Eligibility criteria apply.
Additional Taxes:
Foreign Buyers: An additional 20% tax applies to foreign nationals, foreign corporations, or taxable trustees purchasing residential property in specific areas.
For precise calculations and to explore potential exemptions, consult with a legal professional or use the BC Property Transfer Tax Calculator. Understanding the PTT and associated costs ensures a smoother home-buying experience in British Columbia.
GST for First-Time Home Buyers in Canada
When purchasing a home in Canada, the Goods and Services Tax (GST) is applicable to new homes. However, there are some reliefs available for first-time homebuyers. Here’s what you need to know:
What is GST on New Homes?
GST applies to new homes (not resale homes) and is charged at a rate of 5% on the purchase price of the home.
This applies to the home’s sale price as well as any additional fees (such as the cost of land).
GST Relief for First-Time Homebuyers
As a first-time homebuyer, you may be eligible for a partial or full GST rebate if your new home meets specific conditions. The rebate can help reduce the overall cost of your home purchase.
GST Rebate Amount:
The GST New Housing Rebate allows you to recover part of the GST you paid on the purchase of a new home. The amount you can claim depends on the price of the home and whether the property is your primary residence.
Up to $6,300 rebate on the federal GST (5%) if the home costs $350,000 or less.
Partial rebate available for homes priced between $350,000 and $450,000.
No rebate if the home price exceeds $450,000.
Eligibility Requirements for GST Rebate
To qualify for the GST New Housing Rebate, the home must be:
New or substantially renovated (not resale).
Used as your primary place of residence (you must live in the home within one year of ownership).
Additionally, you must be a first-time homebuyer or meet the conditions of the first-time buyer’s tax credit to qualify for the rebate.
How to Apply for the GST Rebate
Apply at the time of purchase: If you're purchasing directly from the builder, the rebate is typically applied when you buy the home, and the builder may adjust the sale price.
File for the rebate yourself: If you purchase from a builder who doesn’t apply the rebate for you, you can claim it by filing a GST/HST rebate application with the Canada Revenue Agency (CRA) after you close on the home.
Important Tips:
If your new home is priced above $450,000, GST rebates will not apply. However, you may still be eligible for other government incentives.
Always consult with a tax professional or real estate lawyer to ensure you're receiving all the rebates and incentives you qualify for.
Strata Fees: Know the Costs Before You Buy
When purchasing a condo or townhouse in a strata property (like a condo building or a townhouse complex), strata fees are a significant ongoing cost that must be factored into your budget. Here's what you need to know:
What Are Strata Fees?
Strata fees are regular payments made by the owners of individual units in a strata property. These fees cover the maintenance and management of shared spaces and services within the building or complex, such as:
Building maintenance (e.g., cleaning, landscaping, elevator repairs).
Shared utilities (e.g., water, heating, garbage removal).
Insurance for the building.
Management fees for the property management company (if applicable).
Reserve fund contributions for major repairs (roof replacement, exterior painting, etc.).
How Much Are Strata Fees?
Strata fees vary widely depending on the size, age, and location of the property, as well as the amenities offered. Typical costs can range from $100 to $1,000+ per month, but it’s important to understand the specifics of each property. Larger buildings or complexes with more amenities (e.g., pools, gyms, concierge services) tend to have higher strata fees.
Why Are Strata Fees Important?
Ongoing Cost: These fees are paid monthly, so they need to be accounted for in your monthly budget along with your mortgage payment.
Potential for Increases: Strata fees can increase over time, especially if major repairs or upgrades are needed. Be sure to ask the seller about the history of fee increases.
Reserve Fund Health: A well-maintained reserve fund means fewer unexpected costs. Ask for a copy of the strata’s financial statement to see if the fund is adequately funded.
How to Calculate Strata Fees into Your Budget
When deciding whether to buy a strata property, make sure you calculate the total cost of ownership:
Mortgage + Strata Fees = Your total monthly housing cost.
Don’t forget to include property taxes, insurance, utilities, and any other additional costs.
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