Now that you know what you can afford, the next step is to determine the
additional costs of the home-buying process. According to CMHC and GE
Capital, one should have, in addition to the down payment, at least
1.5% of the purchase price for closing costs (we say 2-2.5%, just to
be on the safe side). The costs vary across provinces, and for that
Below you will find a brief explanation of these
costs, yet it may not include all items required specific to your
property, or the area in which you have purchased. This is a
guideline, but your lawyer can provide a fairly close estimate, and is
the best resource.
The appraisal provides
the lenders with a professional opinion of the market value of the
property. This cost is normally the borrower's
responsibility and it ranges as low as $100 for a drive-by appraisal
to as much as $200 for a full appraisal, and the average being $175,
plus H.S.T./G.S.T. Occasionally, the costs could be slightly higher for
larger, custom-built homes, or homes in remote parts.
Home Inspection Fee:
A professional inspection of the home, top to bottom, is for the benefit of the
buyer, therefore, that's who absorbs the cost. A typical home
inspection can cost anywhere from $250-$350, but our opinion is that
they are well worth the investment. New home buyers may not worry
about it, but a definite must for buyers purchasing properties older
than 5 years. When hiring a home inspector, make sure the inspector
has liability insurance, just in case a mistake is made.
All mortgage lenders will require a certificate of fire insurance to be in place from the
time you take possession of the home. The amount required is generally
at least the amount of the mortgage or the replacement cost of the
home. This cost can vary on the property size and extras being
insured, as well as the insurance company and the municipality. The
cost can vary anywhere from $250-$600 for most properties.
Land Survey Fee Or Title Insurance Fee:
A recent Survey of the property is usually required by the lender, and if one is not
available, it normally costs anywhere from $600-$900 for a new survey.
In lieu of the Survey, most lenders today will accept Title Insurance,
at a much lower price of approximately $225.
Legal Costs and Disbursements:
A lawyer or notary will
charge a fee for their professional services involved in drafting the
title deed, preparing the mortgage, and conducting the various
searches. The disbursements, on the other hand, are out-of-pocket
expenses incurred, such as registrations, searches, supplies, etc.,
Land Transfer Tax:
Most provinces charge a land transfer tax, payable by the purchaser,
and the amount varies from province to province. This tax is based on
the purchase price (refer to mortgage ABC's for exact calculation).
New Home Warranty:
In many provinces, new homes are covered by a new home warranty program.
The cost to the purchaser for this warranty is approximately $600 and
should the builder default or fail to build to an agreed-upon standard,
the fund will finish or repair the deficiencies.
Mortgage Application and Processing Fee:
On a high-ratio insured mortgage (mortgages above 75% of the purchase
price), the mortgage insurer (CMHC or GE Capital) charges a fee of
$165-$185 for applying and processing the file, as well as appraising
the property. On new homes, this fee drops to $75.
An estimate should be made for closing adjustments for bills that
the seller has prepaid such as property taxes, utility bills, and other
charges. Any bills after the closing date are the purchaser's
responsibility. Your lawyer/notary will let you know what they are
exactly once the various searches have been completed.
On the purchase of a newly constructed home, G.S.T/H.S.T. is payable, but make
sure you know who pays this, you or the builder. Therefore, on the offer,
the purchase price will say "Plus G.S.T/H.S.T." or "G.S.T/H.S.T. Included",
and who gets the G.S.T/H.S.T. new home rebate. A lot of builders have included this
cost into the purchase price so that the buyer does not have to come up with
that at closing. (As well, this tax is also charged on all professional fees).