youngandthrifty examines some closing costs (e.g. property taxes, home insurance, home inspection) to save up for when buying your first home in Canada.
There are lots of costs to think about when you buy your home (not just the down payment you have to worry about and the actual mortgage loan, but lots of other things that can add up).
Here are some of these costs (HINT: They include lots of taxes. Awesome…):
- This can range anywhere from $400 to $1000 for a thorough home inspection
- Make sure you don’t use the home inspector the selling realtor recommends (if you are using a dual agent, for example) because it could potentially be a conflict of interest (maybe..)
- Go with recommendations and good referrals
- There are lots of different insurance companies, so make sure you go with an insurance provider who is willing to search for the best deal for you
- The insurance amount depends on how old your roof is, what type of piping is used, whether you want insurance in case your house crumbles in an earthquake, where your house is etc. Lots of factors that come into play
- Some insurance providers have access to different insurance companies, so it doesn’t hurt to shop around
- You will pay more for home insurance if you are buying a house, and are leaving the house unoccupied during renovations
- You will pay more insurance if you plan to rent a part of your house out (makes sense: another stove in the basement can mean more chance of a fire being set off)
Property Transfer Tax
- This number varies depending on fair market value of your home
- In British Columbia (it varies from province to province), this tax is: 1% of the fair market value of your home under $200,000, and 2% on the remaining balance
- For example, if you bought a home that was assessed at $500,000 fair market value, the tax you will have to pay to the government is: $2000 + $8000
- You may be exempt from paying this blasted property transfer tax if you are a first time home buyer and if the fair market value of the home is under $425,000. They may be able to do an exception for you if your home is under $450,000 too.
- Thanks to our wonderful Provincial government, if you buy a new home, you will have to pay HST (that’s 12% over here in beautiful British Columbia)
- If your home is less than $525,000 the government will rebate you back the 7% difference from the HST to the previous GST so you don’t have any additional tax burden (awe.. that’s nice of them, ain’t it?)
Notary/ Lawyer Fees
- This is usually around $850 if you go with a Notary Public
- It is likely more expensive if you do it through a lawyer, but you can always contact them to see how much they charge
- They will help you with the Land Title Registration among other things
Life and Disability Mortgage Insurance
- This is about $60-$100 a month and your bank/ mortgage provider will ask you to decide whether you would like life and disability insurance
- For example, in case your partner dies (knock on wood), then the bank will pay $500,000 automatically
- They have disability insurance too, but they will only offer to pay the mortgage for two years while you are on disability (it may vary between different providers)
- Your work may have life insurance, but it may be insignificant (like $50,000 insignificant)
CMHC (Canadian Mortgage and Housing Corporation) Insurance
- In the case where you are not able to provide at least 20% down payment, this insurance protects lenders against mortgage default
- So it’s possible for those who want to put 5 or 10% down (though not recommended…) for a home
- The amount pay depends on how much you put down. Here’s a chart from CMHC explaining it all.
- This can cost about $250+ for a standard lot (30×122)
- The lending institution will want a survey certificate presented to them
- They want to know the formal boundaries of your land
- Often you can get this paid for by the lending institution (negotiate!)
- It is an appraisal of how much your home is worth (they check homes sold near by etc.) before you are approved for the loan from the lending institution
- If the previous owner of the home had already paid the property taxes for the year, you will have to pay a portion of it back to them (organized through the Notary or Lawyer), and the portion depends on when you bought the home
- Property Taxes are assessed once a year- a City assessor comes by and checks out how spiffy your home looks from the outside and gives it an approximate value
- So it might help to make sure your home looks as run down as possible when they come around, so you can pay less property taxes (kidding!)
There you have it. That was exhausting to say the least.
Any additional costs that I might have missed? Readers, just for fun, which is your least favourite cost to incur?