Lara – Larisa Bezglasna (Vancouver)
Nowadays it was possible to make a purchase of real estate even with zero % down-payment. However, in order to be able to do that, you would need to purchase an additional insurance to the mortgage, for example : CHMC (Canadian Home Mortgage Coverage), which is referred to as “High Ratio Financing.”
CHMC: The cost of this insurance is between 1% and 4.15% of the total credit amount and depends on the loan term. Approximate, sums of CHMC in Royal Bank are: 5% down – 3.15%, 10% down – 2.4%, 15% down – 2.15% and 20% down – 0%! The insurance then is added to your total credit sum, which only slightly increases your monthly payments. These additional costs can be avoided if you are able to make a down payment of about 20-25% of the total.
According to the law, when buying real estate one needs to pay the government an additional tax – the “Property Transfer Tax”.
It is calculated as a sum of 1% of the first $200,000 and 2% of the remaining purchase price. For example, when you buy a house for $500,000, your tax will be $8,000: the first $2,000 derived from 1% of 200,000 and the additional $6,000 from 2% of the remaining $300,000.
It is important to know that for the first-time property buyers it is possible to be exempt from the above-mentioned tax through the “First Home Buyers Exemption”. To obtain this exemption you will need to satisfy a set of conditions as well as to complete a special application form when signing the contract for purchase with your lawyer or notary.
The main conditions in addition to being a first-time property buyer are:
– the total purchase price should not exceed $475,000 (although, one may be partially exempt from the tax if the purchase price is below $500,000)
– the buyer has to be a Canadian Citizen or a Permanent Resident
– the buyer should have lived in BC for at least 12 months to the day of purchase
– the buyer(s) should reside in the purchased property for at least a year after the purchase day
As a first time buyer you can obtain complete information about this exemption, pertinent to your individual situation, from your Notary or a city hall website.
(Goods and Services Tax) when buying a new home
As soon as you buy real estate directly from the developer and become the first official owner of a unit, this tax is added to the purchase price. As of January 1, 2008 this tax is 5%. If your estate costs less than $500,000 and if you are going to live in the place that you are purchasing (as opposed to renting it out), then you are entitled to receive a “New Housing Rebate” on the tax that you have paid. For example, if your estate costs below $350,000 the rebate will be at a maximum discount rate and it will return You 36% of the money paid for GST. A special formula is used to calculate GST for purchases between $350,000 and $450,000 where the amount of the rebate proportionally decreases as the purchase price grows.
Usually your lawyer or Notary will provide you with the exact amount of your GST on the day of completion of sale. Moreover, you have the right to file an application for a rebate within two years of the completion of sale.
- The buyer has to choose their own Notary or Lawyer to complete the purchase and register the property to their name in the Land Title Registry. The cost of these services varies slightly and can be around $400-$700. There will be the necessary papers check and to to arrange on the top of their service fee ( $400 – 1400) if it is a regular transaction . It is recommend that you find out ahead of time the cost of services as well as the details on what exactly is included in these services. Very often the initial price quoted does not include additional expenses so it will take some research and diligence to determine the total cost.
- Title Insurance. It is important to know, that Title Insurance has two parts: Title Insurance for a bank( lender ) that gives you a mortgage and Title Insurance for your own. Your Notary will explain you details of this important document or call your Realtor. For a home less than $500t it might be about $200-400.
Paying the real estate Agent
If a somebody works for you- you have to pay.
In BC the selling agency supposed to pay to the Buyers Realtor. Because of that – sometimes Buyers think that they have no obligation to the Realtor that was showing them homes and was working with them in a buying process.
If a someone works for you – the job should be payed. Realtors are not volunteers and they are obligated to their families and to bill payments like you. Whatever, real estate service service is legally literally free for prospective Buyers, because the payment is coming from the Sellers side Anyway the Buyer should know, that actually the Buyer hires a Realtor to work for a him and a somebody else is paying instead of the Buyer.Because of that –
it is a Buyer`s responsibility to be make sure that his Realtor will be paid for his time, efforts and liability. Also because in Canada the only one Realtor is getting commissions for Buying a property for a client , it is not appropriate to use a several Agents at the same time for the same Buyer.
The Realtor gets their commission from the Seller for marketing, for finding a client, filling out all necessary documents and preparing the registration of the property under the name of the Buyer. Realtor is checking the offer and prevents his client from mistakes and unnecessary loses. As much better marketing plan is and as much accurate market price indicated – as much more chances you have to sell your property.
The main remuneration for selling or buying a property Realtors are getting for their advocate duties and the responsibilities that they are taking for your deal. Liability is the most expensive part of Realtor`s payment.
Simple logic is here: make sure, that you do not hire a cheap Doctor to do your surgery and do not go for a cheap service Realtor to do your expensive transaction. Traditionally the reward reflects in the efforts even though Realtors must act in the best interest of their Buyers and Sellers all the time.
Prices depend of the size. Average :$250 to $750. Ecological environmental inspection is more.Weekends are more expensive too.
The mortgage cost will be included to your mortgage amount so you will not` feel` it. The house appraisal by a lending company could be up to $350 but often they do it for free. Just ask.
If you have a mortgage and you breach the term of it by selling your current property – you pay penalty to the Lender ( bank ).
The amount in the most cases is 3 month interest fee, but it could be much more – depends of your Mortgage Contract. When we sold a house for $650000 – we pay $25000 as a penalty, but it was too high mortgage rate any way – so we got two times less percentage – which was good to as at the time. Usually Your Mortgage Broker explains these small prints at the beginning it when you are getting the mortgage, but do not forget to ask again.
Annual and monthly expenses for real estate maintenance
Annual Property Tax
As soon as you buy a property, you start paying the annual property tax. The amount you can see on the listing page. In the middle of the year you will receive a letter from the municipality with the Property Tax Notice stating the exact amount of the tax. Usually the deadline to pay your tax is July 1st.
Keep in mind that the British Columbia government offers a “Home Owner Grant” for those who use their property to live in it. This Grant is either $570 or $845 (if one of the owners is over 65 years old or other conditions). This, you need to pay this tax according to one of the following options:
Column A – No Grant, if you are renting out your property and do not reside in the premises
Column B – Basic Grant: tax is decreased by $570, if you live in the property
Column C – Additional Grant: tax is decreased by $845 if one of the owners is over 65 years of age r other conditions.
Please be aware of the fact that if in the first year you do not own the property for the full 12 months but only for a part of the time, the size of the tax will be calculated accordingly. For example, if you bought a house on the 1st of July, you will only have to pay a half of the yearly tax. The other half will be collected from the previous owner.
The Tax amount shale be calculated on your adjustment date by your Lawyer and you will have to pay your part from the completion date..
Annual Utility Fee
At the very beginning of the year you will receive another letter from the municipality – Utility Statement (cost for water, garbage pick up, sewer use). The deadline to pay this bill is usually in the middle of March. On average, this bill for an average house is between $600 and $1200 depends of the location and other facts. In some area you have to pay three times per a year.
In certain municipalities the “Annual Utility Fee” is calculated at the same time as the “Annual Property Tax” which means they will have to be paid at the same time for the house and in
a Strata the date depends of the Strata members decision.
Gas and Hydro
Charges are vary.
Strata Maintenance fee
for the Strata residents are vary. You can see them mostly on the listing page.
Some lenders will not give you money if you do not have a home insurance. Prices are variable from $30for a small apartment to hundreds of dollars. It depends the type of the home ( apartment, house with acreage, house with a mortgage helper and other reasons… )
Now you know what to expect. Usually I count all the expenses ahead – so check out your abilities and let us choose the price range of the property you are going to get! Good luck!