During the home buying process, especially for first-time buyers, unexpected fees may come into play that weren't planned for. The list below outlines the costs involved in purchasing a home. These factors should be considered when putting together your home buying budget.
Initial Deposit ($5000+)
A deposit normally goes with your offer to purchase. The deposit is held in trust by the selling brokerage in lieu of realtor and supplemental fees. On a $300K house you can expect that the initial deposit will be about $5,000 or even $10,000. You'll have to be prepared to write this cheque when you make your initial offer.
Home Inspection ($300+)
An inspection prior to closing a purchase is highly recommended to any buyer purchasing a resale or even new home. The inspector will look at key areas on the property and generate a report based on their findings. Once again, the inspector's fee will be based on the size and complexity of the inspection, however you can expect the fee to be upwards of $400 for a typical single family home. A larger or smaller home will affect the price one way or the other.
Condo Document Review ($300+)
If you are looking at purchasing a condo (traditional or bare land) you may want to have the condo corporation's documents reviewed prior to closing. The documents should include, board meeting minutes, AGM meeting minutes, budgets, financial statements and more. One of the very important pieces of the package will be the reserve fund study. The study outlines replacement and maintenance projections for the complex and ultimately indicates how much the condo corporation should have in accessible at any given time. A lender may request this as well if they so desire, for their own security and valuation. A Condo Doc Review, depending on the complexity, can cost upwards of $300. It's always a good idea to include a term in the purchase contract that stipulates that the seller is to gather and provide all of the required documents prior to conditions being removed from the purchase.
Appraisal Fee ($250+)
Don't be surprised if your lender requests an appraisal on the property you want to buy. The lender will loan a percentage of the value of the property. If they feel the property has been over valued, they may request an appraisal and may use that amount to base the loan amount on. Depending on the size and intricacies of the house, an appraisal can cost between $250 and $1000 (and up).
Land Survey ($500+)
Like the Appraisal, your lender may require a current Real Property Report (RPR) for your purchase. Quite normally, in Alberta, the purchase contract stipulates that a current RPR (with city compliance) will be given to the buyer prior to closing the sale. If the buyer is responsible for the new RPR, a new survey will have to be completed. This can often cost upwards of $500. In order to obtain a stamp of compliance from the city, a fee of approximately $150 will come into play. Should any of the structures on the property interfere or encroach on city land or service paths (easements for gas meter reading), you will also have to have the encroachment approved by the city. This can cost upwards of $300 depending on the encroachment. If you are curious as to how much this is going to cost, feel free to call your city hall to find out.
Mortgage Loan Insurance (1.5% - 3.35% of the principle amount of the mortgage)
When a home buyer pays less than 20% as their down payment, they are required to purchase Mortgage Loan Insurance through a provider like the Canadian Mortgage & Housing Corporation. Some lenders will let you tack this expense onto the mortgage itself. In the case that you can't pay for your mortgage, this policy will come into play. The amount that you will have to pay for insurance will be determined by the amount of your downpayment. If you put 5% down, you will pay 1.5% to 3.35% of the principle plus applicable fees. For example, on a $300K property with 5% down ($15,000), you will have to pay an additional $8977.50 to the insurer.
Property Insurance ($ depends on amount of coverage and reconstruction costs)
Most likely, your lender will require that you have property and full insurance on your new purchase. After all, it's their investment too at this point and the house itself is security against the loan. Your lawyer will need confirmation that the insurance is in place. If something were to happen to the home, this insurance would be paid to the lender first. Then you will have to communicate with your lender to secure funding to rebuild. Your home insurance will be based on the amount of coverage you require as well as common reconstruction costs in the event that the property is damaged.
Title Insurance ($300+)
Although title insurance isn't obligatory, it will protect you against issues that may arise such as encroachments, undisclosed liens or even undischarged mortgages left by the properties previous owners. The cost is usually around just upwards of $300.
Land Transfer Tax
This charge is incurred whenever a property changes owners and is calculated based on the purchase price. Most provinces will charge a provincial land transfer tax and some municipalities also charge an additional city land transfer tax. Alberta and Saskatchewan do not however charge this tax. Instead, in Alberta, you will pay a Property Registration Fee calculated as follows, $50 plus $1 for every $5000 of property value. In Alberta you will also have to pay a mortgage registration fee calculated exactly the same way as the Property Registration Fee. On a $300,000 property these fees might total, $220 and will usually be included in your legal fee breakdown.
Legal Fees ($1000 - $1500+)
Legal fees will include the following, lawyer service fees plus disbursements (additional costs for preparing, researching and conducting a title search etc...) Typically on an average single family home the fees will range from $1000 to $1500. They could vary based on the size of the property as well as the complexity of the process.
GST (Goods & Services Tax)
This Canada wide tax is not charged on resale homes, however it is charged on new builds. The amount of the GST charged of course will depend on the price of the new build.
Other Expenses To Consider
Along with all of the above, you should also consider several other expenses that are going to come into play. Moving expenses, repairs or enhancements to your purchased property may need to be done. Utility account set-up fees, property tax and condo fee adjustments may also be required. The fee adjustments are payable when the seller has already paid beyond the possession date and wants to be reimbursed for that portion of their expenses).
Is this all a bit overwhelming? It shouldn't be. Give me a call and we can talk about the process and all of the fees that will be involved when you decide to purchase a property.