How Much Does It Cost to Buy a Home?
3 -MINUTE READ
According to the 2018 (dated, we know – but still very relevant) CMHC Mortgage Consumer Survey, almost HALF of home-buyers in Canada the last few years have said, “We wish we knew about all of the costs involved with buying a home.”
That’s a lot of people.
We want you to have a full understanding of what to expect in the way of expenses ahead of time. Nobody likes unexpected expenses, especially if it’s measured in thousands of dollars. This blog post is a quick overview, but over in our Help Centre we go into more detail on everything.
Home inspection, condo doc review, and appraisal
When: Offer stage
How much: +/- $1,000
Before you actually close on the purchase of your new place, the cash costs during the Offer stage are about $1,000. This includes about $500 for a home inspection, you might need an appraisal (also up to $500) and you may want or need to have condo documents reviewed for you (you guessed it – $500).
The chances you will need to do all 3 are slim. Not 0%, but slim.
You might even decide NOT to buy a place based on a bad home inspection or condo document review, and then have to pay for another one when you find the next place you want to write an offer on. So keep that in mind.
Deposit with your offer
When: Offer stage
How Much: $5,000 to $10,000 and up
A deposit, as it relates to real estate, is money that is included with a purchase contract, as a sign of good faith. It’s what is used to bind the contract – otherwise known as consideration. Typically, when you make an offer to purchase a property, you would include a certified cheque or a bank draft that gets held by your real estate brokerage while negotiations are being finalized. If your offer is accepted, the deposit is then placed “in trust” where it is held until just before your mortgage closes. The final step is when the deposit is transferred to the lawyer’s trust account and is included as part of your down payment.
The down payment
When: Offer stage (deposit), balance paid at closing
How much: min. 5% of the purchase price
The down payment is the amount of money that you put forward when you buy a home. This amount is usually a specific percentage of the purchase price, most often 5%, 10% or 20% of the house price. Anything you pay as a deposit with your offer will count towards this amount. The rest of the down payment, above and beyond the deposit, is paid about a week before you take possession and is paid to your lawyer in trust. They will then forward the total down payment plus the mortgage funds to the seller to pay them the full purchase price you agreed to.
Legal fees, title insurance, title transfer
When: At closing
How much: +/- $2,000
Legal fees, title insurance, and land title transfers are paid to your real estate lawyer. In order to have all the documentation done correctly, home buyers will need to hire a lawyer. These costs will be different depending on the complexities of the purchase, and the price of the property, but buyers should be prepared to pay at least $2,000 for these three items.
Land transfer taxes (not applicable in Alberta)
When: At closing
How much: $5,000 on a $300,000 purchase
This fee or tax will be a percentage of the purchase price of the property. What the total amount is will be different in each province. Some cities also have a municipal land transfer tax that home buyers will need to pay.
In BC, the property transfer tax is a significant expense (in the thousands of dollars) and is paid by the buyer. Rebates are available for first time buyers or for those purchasing a newly built home.
British Columbia property transfer tax
- 1% on the first $200,000,
- 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
- 3% on the portion of the fair market value greater than $2,000,000, and
- If the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000 (effective February 21, 2018).
A $400,000 property purchase would pay $2,000 (1%) on the first $200,000, and $4,000 (2%) on the next $200,000 for a total of $6,000.
You may qualify to reduce the amount of tax you need to pay if:
- you’re purchasing your first home or
- you’re purchasing a newly built home
