Maria Mak - Metro Vancouver REALTOR® - Buying costs

If you’ve decided to buy a home, it’s important to go into the process knowing all of the costs involved beyond the asking price of the property.

Here’s an overview of costs involved.

Buying costs

Mortgage application

Lenders may charge a mortgage application fee, which will vary depending on the lending institution.

Mortgage insurance

The federal government requires high-ratio mortgages (with less than 20% down payment) to be insured against default. The cost ranges between 1.25 to 3.75 per cent of the mortgage amount which is added to the mortgage principal.

Appraisal fees

Before your lender approves your mortgage, you may be required to have an appraisal done. Sometimes your lender will cover this cost, if not, you are responsible. The fee ranges and is typically as much as $300.

Land survey fees

Lenders may require a survey of the property. Survey costs vary.

Home inspection fees

A home inspection is a report on the condition of the home that can alert you to any potential issues such as structural and moisture problems, as well as electrical, plumbing, roofing and insulation. Fees can range from $500 - $700 depending on the size of the home and the complexity of the inspection. Some inspectors have surcharges for a secondary suite, a crawlspace, over even an older home.

Goods and Services Tax (GST)

A GST rebate equivalent to 36% of the GST paid is available for new homes priced up to $350,000 and a partial rebate on new homes priced up to $450,000.

Buyers will also pay the GST if payable on services such as appraisals and home inspections and survey fees.

Provincial Sales Tax

The PST is generally not payable on services except for legal and notary fees.  Both the GST and PST are paid on legal and notary fees.

2% BC Transition Tax

This is a new tax coming into effect on April 1, 2013. It applies to the sale of new residential homes that are 10% or more complete on April 1, 2013, with ownership or possession occurring on or after April 1, 2013 and before April 1, 2015.

Property Transfer Tax

Home buyers in BC pay a provincial Property Transfer Tax (PTT) when they buy a home. The tax is charged at a rate of 1% on the first $200,000 of the purchase price and 2% on the remainder.

First-time home buyers may be exempt from paying the PTT of 1% on the first $200,000 and 2% on the remainder of the purchase price of a home priced up to $475,000. There is a proportional exemption for between $475,000 and $500,000. At $500,000 and above the rebate is nil. Click here for more cost saving programs.

Property taxes

Some lenders require property buyers to add property tax installments to monthly mortgage payments.

Pre-paid property taxes or utility bills

A buyer typically is required to reimburse the seller for any prepayments.

Mortgage life insurance

If the owner dies, this type of insurance will pay off the balance owing on their mortgage.

Fire and liability insurance

Most lenders require property buyers to carry fire and extended coverage insurance and liability insurance.

Home insurance

Buyers will a mortgage will be required to buy home insurance. To be safe, make the insurance effective on the earlier of either the completion date or the date that you pay the balance of the funds in trust. 

Most lenders also require property buyers to carry fire and extended coverage insurance and liability insurance.

Legal or Notary Public fees

Legal or notary public fees and expenses will likely apply to assist with drafting documents and ensuring the title of the home is transferred properly and without incident. 

Moving fees

Moving fees vary depending on the distance moved and whether professional movers do all of the packing. Rates vary.

Maria Mak - Burnaby REALTOR® - Selling costs

REALTORS® fees or commissions vary. Compensation is always agreed to beforehand between you and your REALTOR®. There is no set commission rate in the real estate profession, and any fee or commission paid depends on the services provided by your REALTOR®, which can vary significantly depending on your needs as a client or the business model used by the REALTOR®.

When is the commission or fee payable?

The Standard Multiple Listing Contract provides that the fee or commission is payable on the earlier of the following:

• completion date under the Contract of Purchase and Sale; or
• the actual date that the sale completes.

 

The GST

GST applies to REALTOR® fees and other services. 

Other

Don’t forget to ask your REALTOR® about these costs when calculating the total cost of selling your home:

• Adjustments, may include property tax adjustments
• Final maintenance and utility costs
• Lawyer or notary fees and expenses – attending to execution of documents
• Costs of clearing the title, including:
  • Discharge fees charged by encumbrance holders
  • Pre-payment penalties
• Insurance – should maintain until the latter of either the date when you receive the proceeds of sale or when you vacate the property
• Home improvements, staging
• Real estate commission fee
• Moving fees

CMHC announces new rules to make it easier for homeowners to rent out property

 

 

Under the new rules, CMHC will consider up to 100% of gross rental income from a two-unit owner-occupied property that is the subject of a loan application submitted for insurance.

Canada Mortgage and Housing Corp. is going to make it easier for homeowners renting out apartments in their principal residences to borrow money, a move that could further heat up markets in Toronto and Vancouver.

The Crown corporation, which controls a majority of the mortgage default insurance market in Canada, announced changes to its rules Monday and effective Sept. 28 which are aimed at boosting affordable housing.

A background document sent to lenders and obtained by the Financial Post suggests the change is aimed at what CMHC sees as a significant part of the housing market.

“Many municipalities across the country now formally recognize secondary rental suites as a source of affordable housing,” CMHC wrote in its document intended for industry partners. “Rents in secondary rental suites are often lower than those for apartments in purpose-built rental buildings.”

The Crown corporation has said Vancouver has 26,600 secondary units which comprise almost 20 per cent of the rental stock in the city.

The changes from CMHC would allow homeowners to count the income from their secondary units when qualifying for a loan, something that would seemingly bring more people into the housing market.

The Crown corporation has suggested this would target two unit owner-occupied homes and would likely include basement rental units, in-law apartments and garden suites known as laneway homes. It suggested, in its document to industry players, secondary apartments usually are self-contained with separate kitchen, sleeping and bathroom facilities.

One key issue will be whether the units are legal. CMHC only recognizes units that are legal or conform to local municipal standards. The Crown corporation says that it’s up to lenders to exercise judgment, when it comes to borrowers proving the units are legal.

Homeowners with less than a 20 per cent down payment and borrowing from a regulated financial institution must get government backed mortgage default insurance. Even financial institutions not regulated by Ottawa, like credit unions, must abide by CMHC rules to be covered by the government backing.

Under the new rules, CMHC will consider up to 100 per cent of gross rental income from a two-unit owner-occupied property that is the subject of a loan application submitted for insurance. The annual principal, interest, municipal tax and heat for the property including the secondary suite must be used when calculating the debt service ratios.

Rob McLister, founder of ratespy.com, said homeowners with legal units can now only count 50 per cent of the income from legal rentals for calculating their household income which determines how much they can borrow. “It will be marginally inflationary for single family homes,” said McLister.

The change comes on a day when one economist predicted prices in the Toronto and Vancouver markets could drop by as much as 30 per cent. “Lower mortgage rates have enabled Canada’s key housing markets to defy gravity for the past few years. But with prices rising dangerously high relative to household incomes, there is the potential for a large correction down the road,” wrote David Madani, of Capital Economics, in a note out Tuesday.

Doug Porter, chief economist with Bank of Montreal, said it might encourage some people to jump into the housing market who might have been on the fence.

“I think first and foremost this tries to address the lack of affordable housing. Whether it will be effective is another issue,” said Porter, who thinks it will help on the margins.

Elton Ash, region executive vice-president of Re/Max of Western Canada, said the changes will make a difference in Toronto and Vancouver. “It could have a very strong positive effect on qualifying for a mortgage,” he said, adding there’s strong interest from consumers in renting out part of their primary residences.

Why a REALTOR®?

Maybe you're buying a home for the first time. Or maybe you're selling your old home to move to something new. Whether buying or selling, you’re involved in an intricate process requiring many specialists. One of these specialists might be a REALTOR^®, who’s responsible for making the transaction as easy as possible for you.

The REALTOR^® Difference

However, not every licensed or registered broker or salesperson is a REALTOR^®. To be a REALTOR^®, the agent must be a member of The Canadian Real Estate Association (CREA). And to be a member of CREA, an agent is expected to be:

• Committed to the REALTOR^® Code: The code is the accepted standard of conduct for all real estate practitioners who are REALTORS^®. It's your guarantee of professional conduct and the quality service. Read more about the REALTOR^® Code.
• Knowledgeable about developments in real estate: A REALTOR^® can get you the information needed to make an informed decision: comparable prices, neighborhood trends, housing market conditions and more.
• Actively updating education: Through courses, workshops and other professional development, a REALTOR^® maintains a high level of current knowledge about real estate.
• Access:  REALTORS^® have access to Board MLS^® Systems, which facilitate the cooperate sale of properties to benefit consumers.

Benefits of a REALTOR^®

Whether buying or selling a home, you can trust that your REALTOR^® will ensure the transaction is completed competently and professionally. You don’t have to worry about the details – your REALTOR^® can take care of them for you. You can get advice from someone with an intimate knowledge of the local housing market. And you can count on the help of a professional who has committed to serve with integrity and competence.