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Purchaser's Expenditures
It is important to understand that besides the purchase price
of a home there are some extra costs involved in purchasing
a home. It can be annoying to find out the extra costs by
surprise. The following is some of the potential costs a purchaser
should have knowledge of:
| 1) |
Property Transfer Tax. Calculated
on the purchase price of the home. It is 1% on the first
$200,000 and 2% on the amount above $200,000. However,
there is a "First Time Home Buyers Property Transfer
Tax Exemption Program." In general to qualify for
the exemption:
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Each purchaser must be a Canadian Citizen or a
permanent resident of Canada. And must have resided
in B.C. for at least one year. |
| - |
The amount borrowed must be at least 70% of the
purchase price. |
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The purchase price must not exceed $325,000 if
located in the Lower Mainland. |
| - |
See Property
Transfer Tax Exemption Program to see more details
about the exemption program. |
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| 2) |
Mortgage loan insurance. Those mortgage with
less than a 25% down payment require a mortgage loan
insurance. The cost is usually added to the amount of
the mortgage. See the chart below for the premium rates
for the mortgage loan insurance.
Loan to Value Ratio and Corresponding premiums:
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% Borrowed
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% Premiums
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To 65%
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0.50%
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65.01-75%
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0.65%
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75.01-80%
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1.00%
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80.01%-85%
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1.75%
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85.01-90%
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2.00%
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90.01-95%
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3.25%
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Eg. If you put down only 7%, and your mortgage amount
is $100,000. You will be required to pay a mortgage
loan insurance premium of $3,250. Therefore, your total
mortgage now becomes $103,250.
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| 3) |
Goods and Service Tax. The 7% GST is payable
for the purchase of any new home, or a home which has
been substantially renovated. A purchaser may be entitled
to a GST rebate of 36% if the Purchaser or a relative
of the purchaser will be residing in the new home and
making the home their permanent residence. The full rebate
of 36% is only on residential premises of $350,000.00
or less. Purchasers of residential properties of $450,000.00
or more are not eligible for any rebate. Purchases between
$350,000.00 and $450,000.00 are entitled to a gradual
reduced rebate from 36% to 0%. |
| 4) |
Appraisal Fee. The mortgage lender will require
a professional appraisal of the property to determine
whether the selling price is reasonable for that market.
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| 5) |
Legal Fees. This is the fee paid to your lawyer
or notary. A notary is not always cheaper than a lawyer.
And one consideration to take is that a notary will not
be able to give you the legal advice a lawyer can. Therefore,
many purchasers will choose a lawyer who has experience
doing real estate transactions. The lawyer or notary will
provide you with a detailed list of expenses incurred(photocopies,
courier fees, title searches, etc.) as well as their fee.
This will be paid on or before the closing date. |
| 6) |
Survey. The cost is approximately $275.00. A
Survey certificate is required to ensure that the house
in questions does not cross over the property line and
encroach on another property. Some vendors will already
possess a Survey of the house. In this case, the purchaser
will be able to save cost of getting a survey. Surveys
are not necessary for Strata properties. |
| 7) |
Adjustments. These are prepaid expenses which
will need to be prorated between the Vendor and the Purchaser.
For instance, a typical adjustment deals with the property
taxes paid to the City or Municipality. The amount paid
will be adjusted as of the adjustment date and one party
will be required to reimburse the other. Other typical
adjustments include strata maintenance fees and utility
expenses. |
| 8) |
Home Inspection Fee. Costs depend on the company
and size of the home, but they usually range from $275
to $600. This is paid at the time of the home inspection. |
| 9) |
Fire Insurance. Your lender will require you
to purchase fire insurance for your home. Costs can vary
depending on the coverage you would like. See your insurance
agent for more details and the costs. |
| 10) |
Moving Costs. Costs depend on the moving company.
Some will charge for travel time as well as insurance.
Others will not. Charges depend on the number of hours
and number of workers. |
It is important to note that out of the Purchaser's Expenditures,
Expenses 1-7 can be paid on or before the closing date. And
Expenses 8-10 are paid at the time of purchase.
The information regarding the Purchaser's Expenditures is
just a guide for one planning to purchase a home. Of course
everybody's situation is different. There may be some cases
where not all the expenditures apply and there may be situations
where additional expenses are necessary (eg. Second mortgage,
power of attorney, etc.). Please consult with a lawyer as
early as possible to determine the cash requirements necessary
to purchase a home.
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