Wondering how much it costs to buy a home? Read this.
Wondering what your first home is going to cost you?
Here are the costs of buying a home from offer to closing so you can be informed before you set foot on a property tour.
The Down Payment
Your down payment comes into the buying process at the start of your buying journey and on closing. In the beginning, it helps to determine the amount of mortgage you qualify for, but also if you require mortgage insurance. The down payment is not a part of the mortgage loan. You need to have a minimum of 5% down payment on amounts of up to $500K, but it will require paying loan insurance from CMHC. For a purchase price between $500K but under $1M, a sliding scale between 5-10% is used. To avoid paying the coverage, you need a minimum of 20% down.
Mortgage Default Insurance
If you have less than 20% down payment, you require mortgage loan insurance through Genworth Financial or the CMHC. So, what’s that going to cost you? Typically, 1-3% on the principal amount of the mortgage, depending on the amount of your down payment and the amount of the loan.
The deposit is more than likely the first cheque you’ll write in the buying process. When you offer to purchase a home, the deposit is paid to show that you are genuinely serious about buying the property. The deposit also forms part of your down payment, and the balance is paid on closing. A standard deposit is usually about 5% of the purchase price, but it can also vary in sum. For example, if you offered $400,000, your deposit would be $20,000 using the 5% standard.
Your lender may ask for a certified appraisal of the home you are purchasing. An appraisal helps them to determine whether the property is worth the amount they will lend you. These fees vary, but on the lower end it’s about $300, and tops out at $450 on the high end.
The Home Inspection
Home inspections aren’t always part of the conditions to purchase, but it is best practise to have it done, including, in some cases, prior to placing an offer. The inspection fee is also one that varies depending on the size of the house and the inspector you use. Typically, your home inspection will roughly cost you about $400-$800.
Title Insurance and Property Insurance
Your lender will require you to purchase title insurance to protect their investment and yours – it’s usually less than $250. Although this is a type of insurance policy, it is one that is only paid once and covers you for as long as you own your home.
Property insurance is also a requirement of your lender and covers the cost of replacing your home and your belongings inside should anything happen to it. The average Canadian pays about $850 a year in property insurance, and it must be in place on the closing day.
You will need a lawyer to complete the purchase of your new home. The lawyer makes sure all documentation is in order, registers your mortgage, registers you as the new owner, and as performs a title search. These fees also vary, but you could be paying upwards of $1,500.
There are some other important costs to consider when purchasing your first home, including property taxes, moving fees, repairs and renovations and, condominium fees. Don’t forget to add utilities such as heating, hydro, water and any services such as internet, cable or phone.