First Time Home Buyers: How To Figure Out Your Key Costs
Today’s post is by local Realtor Teri Conrad. Teri is a Licensed Realtor in Langley, BC, a social media fanatic, a regular blogger at her own TLCHOME Rants and Raves . In this post, Teri talks about the hidden costs you should consider when purchasing your first home.
I’ve worked with so many 1st time buyers. You’re a ton of fun to work with because you’re so excited to finally get into the market and be an owner! But you often have a ton of questions from hidden costs, to procedure to where do I even begin??
Well let’s start at the beginning….in my last post about first-time home buyers for Build Direct, we wrote about getting in touch with a lender first to identify your purchasing power. It only makes sense to figure out your price range and start shopping from there.
Today I want to discuss some of the key costs that you should be aware of. Here they are.
(This is written for BC, Canada Real Estate transactions but most states/provinces will have similar costs.)
1. In BC, every purchase will have a Property Transfer Tax and it’s always 1% of the first $200,000 and 2% on the balance. So for a $300,000 condo you can expect to pay $4000.00 This would be money up front that cannot be rolled into your mortgage.
2. If you’re purchasing a brand new property you will be paying HST as of July 1st , 2010. (Up until now you would always have paid GST.) If your purchase is for the same $300,000 condo, then you will be eligible for a partial rebate. (The Government increased the threshold from $400,000 – $500,000. There is an excellent Real Estate law article written here. Talk to your lender about rolling these costs into your mortgage.
3. There is another new change this year for home purchasers. Canada Mortgage and Housing Corporation (CMHC) is a federally driven mortgage insurance program. (Most people are confused and believe that they are personally insured with CMHC, but in fact it’s purpose is to ensure the lending institution should you fail to pay your mortgage. )
Finance Minister Jim Flaherty announced in February, 2010 that the government planned to tighten lending regulations and so all new buyers will have to qualify at the higher 5 year fixed rate. Keep in mind if you have 20% or more down payment you will not be required to purchase CMHC insurance.
4. Every time you write an offer, you will be expected to have a cash deposit. Cash upfront (by way of bank draft usually) that will be held in trust by the Real Estate Brokerage as a measure of good faith that you intend to complete the sale. These funds will be applied to your purchase. However it is an additional cost upfront that is usually 5 – 10% of the total purchase price.
5. First Time Homebuyers are eligible for a Tax Credit and the Federal Government has made it easier for 1st Time buyers to get into the market by allowing you to withdraw funds from your RRSP’s tax free up to $25,000! Canada’s Government introduces financial help for first-time home buyers. The Tax Credit is not huge – only $750, but hey – every little bit counts!
So there you go. Your other major cost will be your legal fees. Plan to spend around $1000 that include the cost of transferring Title. The silver lining is that right now, you as the Buyer do not have to pay the commission of your Realtor. The Listing Realtor pays the Buyer Realtor out of their own commission although that may one day change…
… but that we’ll discuss in another post!