Jazz Gill

How much will it really cost?

Once you have figured out the home price range you can afford and the type of mortgage you qualify for, you will need to calculate all of the associated costs of the transaction to make sure you are financially ready.

Upfront Costs

You will need to plan ahead to cover the many up-front costs of buying a home. Timing is important to help make sure things go smoothly.

• Mortgage Loan Insurance Premium - If yours is a high-ratio mortgage (less than 20% down payment), your lender may need mortgage loan insurance. Your lender may add the mortgage insurance premium to your mortgage or ask you to pay it in full upon closing.

• Appraisal Fee - Your mortgage lender may require that the property be appraised at your expense. An appraisal is an estimate of the value of the home. The cost is usually between $250 and $350 and must be paid when you contract for those services.

• Deposit. This is part of your down payment and must be paid when you make an Offer to Purchase. The cost varies depending on the area, but it may be up to 5% of the purchase price. If you wish to make a down payment of 5% and you give a deposit of 5%, then your down payment is considered to be made.

• Down Payment - With mortgage loan insurance from CMHC you can own your home with a minimum down payment of 5%. At least 20% of the purchase price is usually required for a conventional mortgage.

• Estoppel Certificate Fee (does not apply in Quebec). This applies if you are buying a condominium or strata unit and could cost up to $100.

• Home Inspection Fee - CMHC recommends that you make a home inspection a condition of your Offer to Purchase. A home inspection is a report on the condition of the home and generally costs around $500, depending on the complexities of the inspection. For example, it may be more costly to inspect a large home or one where issues such as moisture problems, pyrite, radon gas or urea-formaldehyde are suspected.

• Land Registration Fees (sometimes called a Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchases Tax). You may have to pay this provincial or municipal charge upon closing in some provinces and territories. The cost is a percentage of the property’s purchase price and may vary. Check with your lawyer/notary to see what the current rates are.

• Prepaid Property Taxes and/or Utility Bills - To reimburse the vendor for prepaid costs such as property taxes, filling the oil tank and so on.

• Property Insurance - The mortgage lender requires this because the home is security for the mortgage. This insurance covers the cost of replacing your home and its contents. Property insurance must be in place on closing day.

• Survey or Certificate of Location Cost - The mortgage lender may ask for an up-to-date survey or certificate of location prior to finalizing the mortgage loan. If the seller does not have one or does not agree to get one, you will have to pay for it yourself. It can cost in the $1,000 to $2,000 range.

• Water Tests - If the home has a well, you will want to have the quality of the water tested to ensure that the water supply is adequate and the water is potable. You can negotiate these costs with the vendor and list them in your Offer to Purchase.

• Septic tank - If the house has a septic tank, it should be checked to make sure it is in good working order. You can negotiate the cost with the vendor and list it in your Offer to Purchase.

• Legal Fees and Disbursements - Must be paid upon closing and cost a minimum of $500 (plus GST/HST).Your lawyer/notary will also bill you direct costs to check on the legal status of your property.

• Title Insurance - Your lender or lawyer/notary may suggest title insurance to cover loss caused by defects of title to the property.

If you feel you cannot cover all of the up-front costs, you can ask your lender for a loan. Remember that payment for this loan amount, based on a 12-month repayment period, will have to be included in your

Other Costs

Besides up-front costs, there are other expenses to consider:

1. Appliances - Check to see what comes with the house, if anything.

2. Gardening equipment.

3. Snow - clearing equipment.

4. Window treatments - Check to see what comes with the house.

5. Decorating materials - Paint, wallpaper, flooring and tools for redecorating.

6. Hand tools -You will need some basic hand tools for your new home.

7. Dehumidifier - May be required to control moisture levels, especially in older homes.

8. Moving Expenses

9. Renovations or Repairs.

10. Service connection fees charged for utilities — telephone, gas, electricity, cable TV, satellite TV, Internet and so on. You may be asked to pay a deposit for some utilities.

11. Condominium Fees - You may have to make the initial payment for these monthly fees.

What Should You Buy?

Your Current and Future Needs

Before you start searching for a home, you need to think about your needs both now and in the future. Here are some things to consider:

• Size requirements. Do you need several bedrooms, more than one bathroom, space for a home office, a two-car garage?

• Special features. Do you want air conditioning, storage or hobby space, a fireplace, a swimming pool? Do you have family members with special needs? Do you want special features to save energy, enhance indoor air quality and reduce environmental impact?

• Lifestyles and stages. Do you plan to have children? Do you have teenagers who will be moving away soon? Are you close to retirement? Will you need a home that can accommodate different stages of life?

Try to buy a home that meets most of your needs for the next 5 to 10 years, or find a home that can grow and change with your needs.

Choosing a Location That Is Right for You

Even if the home you choose has everything you need, the location might not be appropriate. When deciding where to live, you should consider:

• Whether you want to live in a city, a town or in the countryside
• Where you work, how easy it will be to get there and the commuting costs
• Where your children will attend school and how they will get there
• Whether you need a safe walking area or recreational facilities such as a park nearby
• How close you would like to be to family and friends

New Home, Previously Owned or Build Your Own?

When thinking about the kind of home you want, the first thing you should consider is whether you want a previously owned home (often called a resale) or a new home.

New Home

• Modern design. A new home has an up-to-date design that takes into account the latest trends, materials and features.

• Personalized choices. You may be able to upgrade or choose certain items such as siding, flooring, cabinets, plumbing and electrical fixtures.

• Up-to-date with the latest codes/standards. The latest building codes, electrical and energy-efficiency standards will be applied.

• Maintenance costs. Lower maintenance costs because everything is new and many items are covered by a warranty. You should still set aside money every year for future maintenance costs.

• Builder warranty. This is a warranty that may be provided by the builder of the home. Be sure to check all the conditions of the warranty - A home builder’s warranty can be important if a major system such as plumbing or heating breaks down.

• New Home Warranty programs. Generally new home warranty programs are provided by provincial and territorial governments, but there are private new home warranty programs. These warranty programs are not available in Nunavut and the Northwest Territories. Check with your real estate agent or lawyer/notary to find out what the new home warranty program in your province or territory covers.

• Neighborhood amenities. such as schools, shopping malls and other services may not be complete for years.

• Taxes. such as the Goods and Services Tax (GST) (or, in certain provinces, the Harmonized Sales Tax (HST)) will apply. However, you may qualify for a rebate of part of the GST or HST on homes that cost less than $450,000. For more information about the GST New Housing Rebate program, visit the Canada Revenue Agency website at, http://www.cra-arc.gc.ca.

• Extra costs. You may have to pay extra if you want to add a fireplace, plant trees and sod, or pave your driveway. Make sure you know exactly what’s included in the price of your home.

Resale Home

• You can see what you are buying. Easy access to services. Probably established in a neighborhood with schools, shopping malls and other services.

• Landscaping is usually done and fencing installed. Previously owned homes may have extras like fireplaces or finished basements or swimming pools.
• No GST/HST. You don’t have to pay the GST/HST unless the house has been renovated substantially, and then the taxes are applied as if it were a new house.
• Possible redecorating and renovations. You may need to redecorate, renovate or do major repairs such as replacing the roof, windows and doors.

Building Your Own Home

Some people prefer the challenge and flexibility of building their own home. On one hand, you make all the decisions about size, design, location, quality of material, level of energy-efficiency and so on. However, you should expect to invest lots of time and energy.

Deciding on the Type of Home to Buy

There are many types of homes to choose from and each has its advantages and disadvantages. Think about your needs before making a decision. Don’t forget to look beyond the walls. The environment surrounding your home can be almost as important as the environment inside of it.

Single-family Detached

A home containing one dwelling unit, that stands alone and sits on its own lot thereby offering a greater degree of privacy.

Semi-detached

A single-family home that is joined to another one by a common wall. It can offer many of the advantages of a single-family detached home and is usually less expensive to buy and maintain.

Duplex

Two single-family homes located one above the other in a building. Often, the owner lives in one unit and rents the other.

Row House or Townhouse

Many similar single-family homes, side-by-side, separated by common walls. They can be freehold, condominiums, or rental units. They offer less privacy than a single-family detached home but still provide a separate outdoor space. These homes can cost less to buy and maintain — but they can also be large, luxury units.

Stacked Townhouse

Usually consists of two-storey homes stacked one on top of the other in a row of four or more homes. The units may have more than one level. All units have direct access from the outside.

Link or Carriage Home

Houses joined by garages or carports which provide access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.

Manufactured Home

A factory-built single-family home that is transported to your chosen location and placed on a foundation. The term manufactured home has replaced the term “mobile home.”

Modular Home

Also a factory-built single-family home constructed in compliance with local building codes. The home is typically shipped to a location in two or more sections and placed on a foundation.

Condominium

A condominium is a form of ownership, not a type of construction. Condominiums can be high-rise residential buildings, townhouse complexes, individual houses and low-rise residential buildings. Condominiums are known as stratus in British Columbia and syndicates of co-ownership in Quebec.