Key costs to be aware of when buying a new home

Buying a new home is an exciting time for many families.  The kids might be thinking of their new bedrooms while the parents are trying to balance their financial picture to get setup comfortably in their soon to be new setting.  I have seen many clients calculate the purchase price of their new home, mortgage rates and legal fees but at times overlook key expenses that make up the entire home buying picture.  Let’s look at some of these key home purchase expenses below.

Are you down with PTT?

This is the Property Transfer Tax that is charged in British Columbia when buying a home.  The buyer pays a one percent tax on the first $200,000 of the purchase price and then an additional two percent on the remaining amount up to $2 million. For any amounts over the $2 million amount, the PTT is 3% and another 2% if over $3 million mark.

There is some good news for first time home buyers that are buying a home up to $500,000 value in the way of an exemption.  As well there are some other qualifiers for new home buyers that are pro-rated for exemption for homes valued up to the $800,000 range. It’s quite the “funky math” equation that your Realtor or Mortgage Broker can help calculate the actual payable rate applicable to your new home purchase.

 Add a little GST to the mix

The tax party continues with applicable GST taxes that will be payable on the purchase of select properties.  The Goods and Services Tax (GST) for a new home is 5% of the purchase price. There is also a partial GST rebate available for new homes and some pro-rated amounts for home priced up to $450,000. 

The Provincial Sales Tax (PST) does not apply to home purchases but could be applicable for other costs such as your notary or legal fees to complete the home sale transaction.

Home Inspection – looking under the hood!

A quality home inspector is highly recommended and can save you lots of trouble and money from the start.  I work with home inspectors that charge between $500 to $1000 per job and their rates vary depending on the type of property and time to conduct the inspection.

Appraisal and Land Survey fees:

Some mortgage lenders may require an appraisal for the property being purchased.  This expense could potentially be covered by some lenders and others may charge $300 and upwards.  Make sure you ask about these type of fees up front and try to negotiate for the charge to be carried or to be included in the process

Mortgage insurance: 
The percentage of your total down payment will determine if you require mortgage insurance or not.  High ratio mortgages that have under a 20% down payment will require the buyer to purchase mortgage insurance.  This insurance expense can range from 0.60% to 4.5% of your mortgage amount.  The federal government will require a 10% down payment on any home that is in the range of $500,000 to $1 million.

Other expenses to keep an eye on

The previously listed five categories can add up easily if not accounted for in the original home purchase plan.  Along with these five key expenses, there will be other considerations and adjustments from the seller side.  Some of these additional expenses may include items such as:

·        Property tax that was previously paid

·        City utility bills that were prepaid

·        Legal fees via lawyer or Notary Public to draft the papers to complete the money transfers

·        Your own moving or storage related expenses

Hopefully this quick overview serves as good value for your future planning.  I always say each home purchase or transaction is unique in it’s own way.  Therefore, I like to take the time in advance to carefully plan and build a solution that accommodates the extras to outline your real buying power.  Feel free to connect for your no obligation session when you are getting ready to hit the buyer’s market.

Best regards,

Sukh Sangha