Deciding to buy a home is a major decision, both financially and emotionally. Since buying a home is probably the single largest purchase a person will ever make, it is important to do your research and know ahead of time all of the costs associated with doing so. Today’s blog will help new buyers better understand all the costs associated with buying a new home!
Legal Fees and Expenses: It is normal practice in BC for buyers to use a lawyer or notary public to transfer ownership of the property. A lawyer also looks out for your best interest by:
- -searching the title in the Land Title and Survey Authority Office
- -ensuring the sellers old mortgage is properly discharged
- -confirming all payments the seller is responsible for have been made
- -preparing a Statement of Adjustments outlining all monies owed by you and the funds you will need to complete the transaction
- -delivering the final amount due to the seller and ensuring you are registered as the owner in the Land Title and Survey Authority Office
Lawyers’/Notary fees generally vary depending on the amount of work done to convey the file. A standard transaction usually costs between $500-$1500.
Home Inspection: Although doing a home inspection isn’t mandatory, it is highly recommended. A home inspection will usually look at the following things:
- -The foundation
- -Heating and cooling
Although home inspectors cannot guarantee that you won’t have any problems with the house, they do provide you with piece of mind and often can save you money down the road by identifying problems before they become too big. Keep in mind that inspectors don’t look inside walls and most don’t include termite inspections. Costs will vary depending on the size of the home but you can expect to pay $300-600.
Other Inspections: As mentioned, a home inspection may not look for termites. If you are considering buying a home in an area with known termite activity you may want to have a termite inspection done.
Other inspections include water quality inspection. If you are moving to a property that relies on well water you may want to have the well inspected for water quality and quantity. Some areas may not have potable water from the well, while others may have low GPM (gallons per minute).
GST: In BC if you are buying a brand new home, you will have to pay GST. However, there may be some rebates available depending on the purchase price of the home.
Property Transfer Tax: Property transfer tax must be paid on all purchases unless you qualify for a first time home owner’s grant. Property transfer tax is 1% on the first $200,000 and 2% on the remainder. For instance if you purchase a house for $350,000 you would owe 1% of $200,000 which is $2,000 plus 2% of $150,000 which is $3,000 for a total of $5,000. For more information of the First Time Home owner Program visit the government of BC website: http://www.sbr.gov.bc.ca/business/Property_Taxes/Property_Transfer_Tax/ptt.htm
Property Tax: If the current owners have already paid the current year’s property tax, you will have to reimburse them for your share of the year’s taxes. Your lawyer will take care of this calculation for you.
Survey Fee: Sometime your lender will request a property survey to verify the property’s boundaries and ensure the property is within the boundaries. Often times the seller will have a copy of the survey certificate, but if they don’t, it may be your responsibility to pay for the survey costs.
Appraisal Fee: Sometimes your lender will request an appraisal of the property in order to approve your financing. This is done on the lenders part to ensure you are not overpaying for the property and that you aren’t asking to borrow way more than a property’s actual value. Some lenders cover the cost of this but others will require you to pay.
Home Insurance: Your lender will usually insist that you have home insurance to cover the property in case of unforeseen events. If you think about this from the banks point of view, it makes sense for them to require you to have home insurance. After the entire house is their collateral for the loan. If something were to happen that completely destroyed the house, such as a fire, the insurance company would be required to pay out your mortgage first, before you receive any insurance proceeds. Your home insurance is based on the value of the house and what its replacement cost would be. Your lawyer will sometimes require confirmation that insurance has been arranged.
Mortgage Insurance: Mortgage insurance protects the lender if you were to default on your mortgage. It is usually required when your mortgage is over 75% of the appraisal cost of your home. It protects the lender in case the price of your house has decreased in value and the value of your home is insufficient to repay the cost of your debt. The cost of mortgage insurance is usually added to the total loan amount and paid for over the term of the mortgage.
Hook-Up Fees: They may be minor in comparison to other fees associated with the purchase of your house, but it’s still important to keep hook-up fees in mind, especially if you are on a tight budget with the purchase of your new home. Hookup fees may apply for utilities such as electricity, gas, telephone, internet and cable/satellite.
Moving Costs: Depending on how much content you have and how far you are moving, costs can vary significantly. For example if you are moving from Toronto to Kamloops, and you are currently in a 4 bedroom home, you need to ensure you get quotes ahead of time for the move so you aren’t caught off guard when the time comes. However, if you are just relocating in Kamloops the cost may not be so big. Also, if you buy or sell your home with Team Cavaliere you can use our moving trailer free of charge! Contact us for more details.
Household Goods: This section is endless and entirely depends on how much money you want to spend on your new home. There are some important things to keep in mind when purchasing a new home such as appliances, window coverings and furniture. If appliances aren’t included in the deal, you will have to purchase this yourself. Fridge, stove, washer/dryer, microwave, and dishwashers can add up very quickly. It’s also important to remember the small things associated with moving. If you are purchasing a house with a pool or hot tub, you may need to buy cleaning supplies, or if your new home has a backyard with grass you may need a lawn mower. Many people also like to get the locks re-keyed or changed when they buy a new house, but that is personal preference. That being said doesn’t forget to add a bit onto your budget for all the small things as well!
Other costs: Other costs that should be taken into consideration are things like condo or strata fees and the cost of maintaining your new home. Inevitably something will leak or break, so make sure you have some money set aside for minor repairs that may come up.
Overall buying a new home can seem like a never-ending financial burden, but at the end of the day, it’s an incredibly rewarding experience to own your own home! As long as you are aware of the costs associated with buying a new home before you actually buy, and budget accordingly so that you don’t buy a home that is more than you can afford, then the costs associated with it aren’t as overwhelming.
A good real estate agent can also help you in understanding many of these costs, so if you are interested in buying a new home contact we today and we can get you started on the road to becoming a new home owner.
In the end, we suggest that you budget 2-3% of your total purchase price for closing costs. While that may be a bit high, it will ensure that there are no surprises on completion date. Buying a home should be a fun and exciting time, nothing will dampen your day more than an unexpected bill.
In the meantime, if you have any questions regarding the information provided or about the Kamloops Real Estate market, contact me or one of our experienced Team Members at River City Realty. We’ll be happy to answer any of your questions. We can be reached at 250-374-1925.