Cost to Own
Buying real estate is the largest purchase most of us ever be involved in. The truth is most people take more time contemplating buying a pair of shoes than they do buying a property! Typically, we will view a property 2-3 times (at approx. 20 minutes each visit) before a decision is made to write an offer. I have found that even repeat buyers or sellers can feel like they're lost in unfamiliar territory. That is where I come in. Realtors are financially compensated by the Sellers who offer a commission (unless the Realtor negotiates a fee agreement with the Buyer directly, typically for off-market /For Sale By Owner listings).
Most people are surprised by all that is involved (cha-ching!) in purchasing real estate. Let me break it down for you:
This is considered your show of faith when you write your offer. This can range anywhere from $1000 to $25,000, depending on the price of the home and how much “help” you need to make a stronger offer. Sellers sometimes request that the deposit be increased once all conditions have been satisfied. This is often a matter of negotiation in the back-and-forth while you counter and re-counter the details of the offer. When you agree upon a due date and amount, you will write a cheque to Remax and it will be held in our trust account until completion date.
At least 5% of the purchase price is required for a high-ratio mortgage and at least 20% of the purchase price is needed for a conventional mortgage. If you have put less than 20% down on a property, you will also be paying for Mortgage Loan Insurance. Mortgage loan insurance helps protects lenders against mortgage default. Make sure you shop around before you commit to a lender.
MORTGAGE INSURANCE PREMIUM
If yours is a high ratio mortgage you will need mortgage insurance. It will be your responsibility to pay the required premium. Your lender will probably add the mortgage insurance premium to your mortgage. The premium varies and can range between approx. 0.65% and 2.75%
Your mortgage lender will sometimes require the property be appraised before they will approve it for financing. This is at your expense. An appraisal is a very accurate estimate of the value of the home. The cost is usually around $350 in the Comox Valley. Some lenders will waive this fee in return for your business. This is another reason to shop around.
The mortgage lender requires this because the home is security for the mortgage – if anything happened to the home (ie. Flood, fire, earthquake) the lender needs to know they can recoup their investment. This insurance covers the cost of replacing the structure of your home and its contents. Property insurance must be in place on closing day. This cost will vary based on the home and your personal belongings and will become a part of your monthly expenses.
A home inspection is a very important condition of the Offer to Purchase and is often your best money spent in the transaction. A home inspection is a report on the condition of the home and is approximately $450 in our area. If you are buying a house that is on well, septic or contains a wood burning fire place you will be paying additional inspectors for these services. Your Home Insurance will almost always require a WETT Inspection (wood burning fireplace) before they agree to insure your home. This is important not only to ensure the safety/livability of the home, but also in re-negotiations on price. We may need to negotiate the price down, warrant that the seller will remedy the deficiencies, or walk away altogether.
LAND TRANSFER TAX
Often called our “Welcome to BC Tax”, this is required on any and all property transfers. The calculation is 1% on the first $200,000 on the purchase price and 2% on balance. There are many government talks of offering buyers some relief on this number, as it has not been adjusted to reflect our MUCH higher property values than when it was implemented 25 years ago. First Time Buyers are exempt from this fee (up to $475,000).
NEW CONSTRUCTION TAX
When you are purchasing a home that is still owned by the Builder/Developer, it will more than likely have GST applicable. Don’t worry, there are rebates available to alleviate this cost.
The mortgage lender may ask for an up-to-date survey prior to finalizing the mortgage loan. If the seller does not have one or does not agree to pay for one, you may have to pay for it yourself. This is in the $350-$450 range.
This is the cost of your Lawyer or Notary and must be paid upon closing. It's in the $900-$1400 ball park (depending if you are buying or selling). A lawyer or notary is required in any and all real estate transactions.
Title insurance covers loss caused by defects of title to the property and may be recommended by your lawyer.
ONGOING COSTS OF OWNERSHIP
Moving Expenses. Movers, packing materials, storage, truck rental.
Appliances. If these do not come with the house or are near the end of their life, expect to replace them.
Gardening equipment. Are you new to a lawn? Time to fill your shed.
Window treatments. Blinds should be included (if present), otherwise you’ll be paying for your privacy.
Decorating. You may intend to paint or replace flooring.
Strata Fees. You may have to make the initial payment for these monthly fees. There may be a move-in fee associated as well (usually $150-$350).
Check out this link for more cost saving programs in BC: http://www.rebgv.org/cost-saving-programs-homeproperty-buyers-and-owners
Having been in this business for 10 years, we will be happy to refer you to my top Inspectors, Mortgage Brokers, Lawyers/Notaries, Accountants, Insurance Brokers, Landscapers, Contractors, Movers, etc. Just ask, but start with this page.