A Guide on the Cost of Purchasing an Investment Property or House in Canada
Purchasing a home or an investment property is one of the biggest investments that a person can make in his entire life. And just like any decision that deals with big amounts of money, there are good and bad choices that can be made that will impact your finances in the coming years. Navigating through the maze of choices can be tedious, but doing a research will pay off its efforts. Home buyers in British Columbia are responsible for the following fees outlined below:
Property Taxes and the First Time Home Buyers’ Program
Property taxes are applied every time a home is purchased. Property tax is usually calculated only at one percent on the initial $200,000 value and then two percent on its remainder. The First Time Home Buyers’ Program gives a PTT exemption if the market value of a certain home is less than $425,000. Most BC regions also offer a proportional exemption given to many first time home buyers with a market value of $25,000 above thresholds. Homes that are valued for $350,000 are charged of a prorated PTT.
Prepaid Property Tax and Utility Bills
Home buyers need to reimburse sellers for prepaid property tax and utilities. If you have availed a high ration mortgage or a mortgage that pays less than 20 percent of the down payment, then you need to purchase mortgage insurance from a private firm or the Canada Mortgage and Housing Corporation (CMHC). If you are able to qualify for vie percent on down payments, CMHC charges you with an insurance amount that equates to 3.25 percent of the entire mortgage. So if you place a 10-15 percent down payment, the insurance charges will reduce to 2 and 1.75, respectively. The premium also gets added in the mortgage. Home buyers also need to pay for the application fee. The standard charge is $235 + HST.
Disbursements to the Land Titles Office
The fees are estimated to cost you around $300. A notary or a lawyer can help arrange the payment.
Appraisals are usually done before lender approves a certain mortgage. The fee averages from $150-$350 plus HST. There are some lenders that cover the cost for you.
Harmonized Sales Tax or HST
For a brand new constructed property, HST is around 12 percent. But if your home values less than $450,000, then you could apply for a certain rebate. You can visit this link to learn more.
HST is usually calculated at six percent on the Purchase Agreement on or even before October 30, 1997. Qualified buyers may claim their respective transitional rebates from the Canada Revenue Agency.
HST is calculated at five percent on Purchase Agreements after October 30 but before November 18, 2009.
HST can be calculated at twelve percent on a Purchase Agreement that is signed after November 18, 2009.
The Survey Fee
A lender may also require a current property survey. If the home seller is not able to provide you with an updated survey, then you need to have it done as soon as you can. Survey fee can cost you around $150 to $350 plus HST.
The Home Inspection Fee
Many agents and realtors recommend that you hire a professional home inspector. For small homes, their services usually cost around $150 -$350 plus HST.
Lawyer and notary fees for closing transactions depend on how complex a certain deal is. Typical fees may range from $600 to $1500 plus HST. First time home buyers are able to apply for exemptions if they meet the following qualifications.
Mortgage term for at least a year. Mortgage balance should not be reduced for more than $11,000 or below 70 percent of the total amount borrowed in the initial year.
Should be financing 70 percent or more of the property’s purchase price.
Total purchase price doesn’t exceed $375,000.
Home buyer has not earned any interest from a principal residence in the past.
A resident of Canada for more than one year before the application and registration for a residence status.
Property will be the principal residence. Buyers who cease to maintain the home as principal resident before registration anniversary may apply for a prorated exemptiom.
Potential buyers usually overlooked the additional costs incurred during the purchase of a property. The extra cost and charges may add up at least 3 percent of the total purchase price. The costs mentioned above are all approximate and subject to change. Ask your realtor today for professional advice.