Buying a home involves many financial considerations. Some home buying expenses are one-time costs while others are ongoing commitments. In addition, there are other costs that you may not be aware of or that you may have forgotten to factor into your calculations.
Here is brief description of some of the costs you may need to consider:
Lawyer/Title Insurance Fees
Even a straightforward home purchase requires a lawyer to review the Offer to Purchase, search the title, draw up mortgage documents, register the loan with the land titles office and tend to the closing details. Lawyer’s fees for a mortgage range widely and will depend on the complexity of the deal.
Some lenders will also require you take out title insurance. Title Insurance is insurance that protects the insured against loss resulting from title and survey defects that would otherwise have been revealed by an up-to-date survey or real property report. Title Insurance also protects the insured against losses associated with fraud and forgery as it relates to the title of your property.
In today's ever changing home market, it is an excellent idea to use the services of a real estate agent. A realtor has the ability to search thousands of potential listings and save you time and money by pin-pointing the properties you will want to consider. Real estate fees are standardized and all fees are paid from the seller of a property. If you are selling your property you should expect to pay 7% on the first $100,000 and 3.5% on the remaining balance of a sold property. When buying you will not pay your realtor anything as their commission is paid from the seller alone.
At Avenue Financial, our service is almost always free as we do not charge any fees to our clients for arranging mortgages. It should be noted, however, that in some situations mortgage brokers will charge a fee for more complex financing and typically do charge fees for second mortgages. Depending on your situation and the complexity of your financing needs, some fees could apply, but will always be disclosed and discussed in advance of placing your mortgage.
CMHC, Genworth, & Canada Guaranty - Financial Insurance (aka Mortgage Default Insurance)
If you have a high-ratio mortgage (less than a 20% down payment) your lender will require mortgage default insurance.
This insurance is different from the home insurance that you would buy to protect against damage to your home or valuables. Canada's three providers, CMHC, Canada Guaranty, and Genworth Financial, offer insurance to the lender to protect against default on payment of the mortgage loan. While this insurance protects the lender, the costs are paid by the homeowner.
The insurance will typically cost between 0.6% and 3.15% of the total amount of the mortgage, but can be higher in unique situations. There is also an application fee which will range from $75 to $235 (typically $165 for a new purchase).
If your loan is not CMHC/Canada Guaranty/Genworth insured, most lenders will require a property appraisal to be done. The appraisal itself is a report designed to determine the current market value of a property.
Some lenders will pick up the cost of an appraisal, while others require the borrower to pay. A basic appraisal for mortgage purposes will fall in the $300–$500 range. Actual cost should be confirmed as it will vary based on the location and size of the property.
Home Inspection Cost
A home inspection is different from an appraisal. A home inspection analyses the structural integrity of a home (foundation, electrical, heating etc.) rather than determining a current market value.
Inspectors are unregulated in many provinces, and fees can range widely. You can expect an approximate cost of $250 – $450 for a home priced under $400,000. Larger, more expensive homes cost more to inspect. A thorough two-hour inspection carried out by an engineer will cost closer to the upper limit. Municipalities can also supply any available inspection reports on the property for a fee.
You know what they say; there are only two certainties in life, death and taxes. Property Taxes are always a certainty! If you have a high-ratio mortgage, some lenders may require that you have your property tax paid monthly in instalments which are added to your mortgage. You can also have a monthly instalment paid through the city using the Tax Instalment Payment Plan (TIPP) depending on the province you live in.
A good estimate of the annual property taxes due is roughly 1% of the total value of your home.
Condominium associations charge monthly fees for common-area maintenance such as grounds keeping and carpet cleaning. Some Condo fees include your heat, electricity, cable etc. Fees range widely depending on the type of structure but will generally average between $200 - $600 per month.
An Estoppel Certificate is a document that outlines a condominium corporation's financial and legal state. The certificate and supporting documents will cost you about $50. Your lawyer will usually handle the acquisition of these documents. (Does not apply in Quebec.)
Your lender will require an up-to-date survey often called a Real Property Report (RPR). Ask the vendor (seller) to provide one as a condition in your Offer to Purchase, otherwise you will have to pay to have one done. The cost of a new survey can be upwards of $500.
In some cases, Title Insurance may be used rather than providing an up-to-date survey, but this may mean getting a survey done at your cost down the line.