Buying a home is an exciting and important life event. Especially, when you are a first time home buyer which means you will likely have many decisions to make and just as many questions that need answering. There are key costs that homebuyers will incur initially and on a continuing basis. To help inform you of what to expect, I have compiled a list of information on the varying costs that you will likely encounter for your dream home!
Most lending institutions will require at least 5% down payment towards the purchase of your home for a high-ratio mortgage. Minimum 20% of the purchase price is still required for a conventional mortgage and for non-owner occupied properties.
Since February 15, 2016, the minimum down payment for new mortgages have been modified and the new breakdown is as follows:
- For homes with a purchase price less than or equal to $500,000 the minimum down payment is 5%
- For homes with a purchase price greater than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance
- For homes with a purchase price of $1 million or more, the minimum down payment is 20%
- Mortgage Application Fee
- Mortgage Broker's Fee (if applicable)
- Mortgage Default Insurance Fee (if applicable)
- Life & Disability Mortgage Insurance Fee (if applicable)
- Fire & Liability Insurance Fee
- Title Insurance Fee (if applicable)
- Estoppel Certificate Fee (if applicable)
- Appraisal Fee (if applicable)
- Survey Fee (if applicable)
- Legal Fees
Mortgage Stress Test
NOTE: Effective January 1, 2018, the Office of the Superintendent of Financial Institutions (OSFI) has set a new minimum qualifying rate, or “stress test” for all prospective home buyers, even those with a down payment of over 20%.
Before the new, tougher rule, only buyers that had a down payment of less than 20% had to make sure they could pass a stress test. Regardless of how much money you save for a down payment, if you don’t pass the new stress test, the bank won’t give you a mortgage.
Under the new mortgage stress test, potential home buyers need to qualify for a mortgage at a rate that is the greater of two indicators: either 200 basis points (2%) higher than the mortgage rate they qualified for, or the Bank of Canada’s five-year benchmark rate.
Before the new stress test, home buyers or owners qualified at the rate offered by the lender. The actual mortgage payment will still be paid at the negotiated rate, but a higher calculation is used for qualifying purposes.
Property Transfer Tax (PTT)
Since 1987, the PTT is levied on all real estate transactions and must be paid before any title is transferred to the new owner at a rate of :
- 1% charged on your first $200,000.
- 2% charged on your balance up to and including $2,000,000.
- 3% charged on your balance 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 (NOTE: Effective February 21, 2018).
If the property is transferred without money changing hands – for example, an inheritance, (known as an arm’s length transaction) – the value is determined by an independent appraisal or BC Assessment.
If your a first time home buyer see Exemptions.
Foreign Buyer's Tax
NOTE: Effective February 21, 2018, an additional PTT charged at a rate of 20% of the fair market value applies to residential property transfers to foreign entites in Greater (Metro) Vancouver, Fraser Valley, Greater Victoria, Kamloops and Kelowna (Previously the rate was 15% and only applicable to purchases in Greater (Metro) Vancouver).
Foreign entities are transferees that are foreign nationals, corporations or taxable trustees.
The additional tax applies on the foreign entity's proportionate share of any applicable residential property transfer, even when the transaction may normally be exempt from the PTT. This includes transactions between related individuals, a transfer resulting from an amalgamation, a transfer to a surviving joint tenant, and a transfer where the transferee is or becomes a trustee in relation to the property, even if the trust does not change. The 15% PTT does not apply to trusts that are mutual fund trusts, real estate investment trusts or specified investment flow-through trusts.
This 15% PTT applies to “Greater Vancouver Regional District” or “Metro Vancouver” municipalities.
Vacancy (Empty Homes) Tax
Properties deemed empty will be subject to a tax of 1% of the property’s assessed taxable value.
Most homes will not be subject to the tax, as it does not apply to principal residences or homes rented for at least six months of the year; however all homeowners are required to submit a declaration.
To submit a declaration see Vacancy Homes Tax.
NOTE: A new speculation tax is coming into play beginning fall 2018. The tax targets foreign and domestic speculators who do not pay income tax in B.C., including those who leave their homes vacant. The tax will begin at 0.5 per cent of assessed property value in 2018 and rise to 2 per cent in 2019.
The annual property taxes due on July 1st, to the municipality will be apportioned to the previous owner & you as of the date of adjustment. If the previous owner has prepaid the taxes for the year, you will be required to reimburse a pro rata portion from the date of adjustment till the end of the year.
For more information see Property Taxes.
While not mandatory, having a home inspection performed is always advisable to give you a "peace of mind". An independent inspection can range from $350 to $1000 + HST for most single-family homes. But the cost varies depending on the home inspection company and the size of the home.
For more information see Home & Property Inspectors.
Home Insurance - Detached Homes
Standard home insurance policies provide coverage for detached homes and content, including personal belongings. Most lenders will require you to carry home insurance as a condition of your mortgage. The cost will vary depending on the value of your home, its contents and your insurer. To protect your investment, ensure home insurance coverage is made available prior to the completion date of your purchase.
Home Insurance - Condos / Townhomes
A strata corporation provides insurance for the overall structure and common areas of a condo / townhome building as well as the original (installed by developer) permanently affixed features inside your unit including kitchen cabinetry, flooring, built-in appliances, etc.
It is recommended that you obtain content insurance to protect the replacement value of your personal belongings as the insurance purchased by the strata does not cover personal belongings. The cost of insurance will vary depending on the value of your belongings and the insurer.
Additional insurance such as Deductible, Betterment, and Rental insurance can also be considered. Ask your insurance provider for details.
Legal Fees & Disbursements
You will need the assistance of a lawyer or notary public to represent on your behalf to help protect your legal interest and assist you with the closing process of your purchase. Legal costs will depend on the complexity of the transaction, approximately $600-$1500 + HST.
- Moving Costs
- Strata / Condominium Fees
- Electricity & Gas Services
- Telephone & Cable Services
- Repair & Renovation Costs