Facebook
Twitter
Pinterest
Copy Link
How much does closing really cost? – The blog of a first time home buyer
This part was probably the biggest shocker to me, the actual cost of buying a home. Spoiler alert, it’s not just the 5% you need for a down-payment! Here how much my house actually ended up costing.
Down payment – $10,000
The down-payment is of course the largest single fee associated with the purchase. This included a $1000 deposit at the time my offer was accepted, with the remaining $9000 due at closing.
Inspection – $0
No, I didn’t get a crazy deal on an inspector, I chose to do my own inspection with a friend whose construction background I trust. The home I bought was five years old, so I made the decision to save myself $500-$700 and not hire an inspector. Full disclosure: I would NOT recommend doing this yourself. A professional can find many potential upcoming issues.
Property Tax – $1040
Yearly property taxes are paid in roughly the middle of the calendar year, and they cover the whole year, so when you buy a home, you need to reimburse the portion of the year that you will own the home.
Here’s the kicker – properties that are not inhabited by their owner in New Brunswick are charged a nearly double tax rate. (NB is the only province that does this) When you buy a home that is being rented (like I did), then you pay back that current rate, and eventually are reimbursed. As of the time of writing, I’m still waiting on a nearly $500 refund.
HST – $0
Only brand new homes are subject to HST, which mine was not. Kind of makes you wonder why you pay HST on a used vehicle…
Land Transfer Tax – $2050
Usually right around 1% of the price of the home. This is the fee to the province to change the property into your name. I don’t claim to understand any more of this, but to me I would argue that this should be a flat fee, but I’m in marketing, not politics.
Default Insurance (CMHC fee) – $0
This fee (4.5% of the mortgage amount in my case) is added on to the mortgage, so no extra fee is paid at closing.
Lawyer – $1350
This fee covers the lawyer who managed the transaction, the title insurance, and several other small things
Home Association – $400 + $47
I purchased a townhouse which has monthly maintenance (snow, lawn, and water) covered by my townhouse’s association. I had to pay a one time $400 contingency fee as well as the rest of the month’s maintenance fee.
NB Power – $138 in transfer fees
Ending my old addresses power and starting the new home’s power cost $120+ tax in fees, in addition to all the regular charge.
New Appliances – $1450 (after I sold my old set)
My home came with a pretty gross washer, so I ordered a new set right away and sold the old pair. I’m not going to add this in the closing cost total since I didn’t technically need to buy this.
Bell – $70
This was the fee to move my internet. I was actually charged about $400, but that’s another rant…
Moving – $120
I tried to keep moving costs as low as possible, so I grabbed a friend, rented a uhaul, had someone deliver pizza and beer (once driving was finished), and did it all myself. As I carried a 60 kg couch up to the 3rd floor I regretted this, but I saved some money, and that’s what counts, right?
So, in total, my closing costs ended up approximately $15,200, or 8.1% of the purchase price, not just the 5% of the down payment. There’s a lot of little things that sneak up on you, so my best recommendation is to avoid stress, don’t try to purchase a home without at least 10% of the purchase price in savings.
Andy Tree is a professional Wedding Photographer, marketing expert, coffee lover, millennial, board game enthusiast, and overall nerd. Over the next weeks he’ll fill you in on every step of his search and first home purchase.
Send us a message on Facebook if you have any specific questions or if you’re ready to start your own search!
The road to ownership – The blog of a first time home buyer
Your offer is accepted and you nearly have the keys to your new house, congrats! There’s just a few steps, called conditions, that you have to take that will take your accepted offer to a sold home. Typically, you’ll have around two weeks to take care of these, which may seem like a lot, but trust me, you’ll want to tackle these as soon as you can.
One invaluable thing Rob had ready for me throughout my process was a “Roadmap to Sold”, a checklist and explanation of the conditions, when they were due, and some recommended companies to work with. If you’re not working with Rob, ask your REALTOR®️ for one such list, hopefully they’ll have something similar for you which will really help keep everything in order.
- Accepted offer sent to mortgage specialist
Once your offer is accepted and has the final signatures from all parties, it will be sent to your mortgage specialist to begin the financing approval. Make sure you contact your mortgage specialist right away to find out what they still need from you and get it to them ASAP! The final application cannot be submitted for approval until they have all the required documents and this part takes the longest.
In my case, I needed to get two extra documents, even though they were fine for the pre approval. Silly things like the date of my partner’s employment letter, which was within 60 days when we were pre-approved, but once we actually were trying to buy, it was “too old”, so we needed another one. You could be asked for nearly anything, so be sure you get this step started as soon as possible!
- Submit the deposit
With your agreement, you’re required to submit a deposit, which is held by the company who has the property listed for sale. Who you send the deposit to, and for how much, depends on your deal, so be sure to get the exact details from your REALTOR®️.
- Insurance Quotes
It’s a good idea to call at least three different insurance companies and obtain quotes for property insurance. This is a self-fulfilling condition, so you are looking for coverage and cost that you are satisfied with. Basically, you can look into this as much or as little as you’d like, then tell your REALTOR®️ you’re all set and boom, condition complete. You don’t actually purchase a policy at this stage, it’s just getting quotes.
From my experience, please do check many different places. I went to four; the first three were all within $50 per year of each other, the fourth was $600 less for even better coverage. Shop around! There may also be discounts for your university or career field, for details like how many smoke detectors or security cameras you have, etc. Also, bundling in your auto insurance may save you more.
- Property Disclosure Statement
You’ll receive a copy of the Property Disclosure Statement form filled out by the sellers. This form covers many topics and is to be completed based on the best of their knowledge while they lived at the property. You’ll review the results with your REALTORⓇ to get an idea of what the seller has dealt with while they lived in the home.
- Home Inspection
By now, you should have received the financing approval letter from your mortgage specialist and are on the home stretch. This, too, is a self-fulfilling condition and is meant for you to have a more thorough look at the property. Although it is highly recommended to hire a professional home inspector to help you meet this condition, it is not mandatory that you use one. You may choose to have/hire independent trades (carpenter, electrician, plumber, landscaper, etc.) to view the property, or inspect the property on your own. The purpose of the inspection is to have a better understanding and to be satisfied with the property you are purchasing.
While the inspection will cost you money, not running into an unforeseen repair in the near future is worth the peace of mind, in my opinion. The results of your inspection will also give you leverage if you do need to renegotiate your offer based on what you find. Discuss your options with your REALTORⓇ.
Once completed, your REALTORⓇ will ask you the following: Knowing what you know now, do you still want to purchase the property? The answer should be Yes or No. However, if there is a larger issue that you had no prior knowledge of and it greatly alters your opinion of the property, but not enough to fully walk away, you may ask for the sellers to correct the issue or reduce the purchase price to offset the concern.
- Water Sample (for homes on well water)
When purchasing a property outside the city limits (not on city mains water), it is a requirement of the banks for there to be drinkable water at the property. Water samples should be taken at the time of the inspection and it is highly recommended to have a professional (Home Inspectors count) collect and deliver the water sample to the lab. Although, it is not mandatory for a professional to take the sample.
Once all the boxes are checked and forms signed, and you don’t have anything to change about your offer, the house is officially sold! Congratulations! Your move date might be next week, or it could be months away, but the house is officially (almost) yours! Next week I’m going to focus a little bit on the real cost of closing the deal.
Andy Tree is a professional Wedding Photographer, marketing expert, coffee lover, millennial, board game enthusiast, and overall nerd. Over the next weeks he’ll fill you in on every step of his search and first home purchase.
Send us a message on Facebook if you have any specific questions or if you’re ready to start your own search!
Why I didn’t use the First Time Home Buyer’s Incentive – The blog of a first time home buyer
A hot topic around election time (and my home purchasing time) was how to improve housing affordability for the average Canadian, and particularly, the first time home buyer. I’m not going to go into any politics, but I will go into what we got right before the election, the Liberal Government’s First Time Home Buyers’ Incentive.
I could explain it myself, but why do that work when I already made a video of Rob explaining it? (Click volume on in the bottom corner)
The First Time Home Buyer Incentive – What you need to know!
The Government of Canada just launched their First Time Home Buyer Incentive, a program designed to help reduce the mortgage payments on your first home. In this video I break down what that means for you.Questions? Give me a shout or leave them in the comment section!
Posted by Rob Hamel – Hamel Realty Group on Wednesday, September 18, 2019
Having an extra 5% towards my house initially sounded nice, but in the end I chose not to use it for a few key reasons. I’m not aiming to convince you one way or another, simply explaining why I chose not to take advantage of it.
In my situation, I would have been eligible for a FTHBI of just under $10,000. This would reduce my monthly mortgage by a little under $50 a month. $50 extra a month is nothing to complain about, but what is, is the fact that when you sell your home, or complete the mortgage, you need to repay the loan in full, at the current value.
Let’s run through a few scenarios. Let’s say I sell in 5 years, my home value remains the same, and I’ve been making minimum payments on my mortgage. In 5 years, I will have built $47,000 in equity. If I can sell it for full value, I will have to pay $11,500 in REALTOR®️ fees, then repay the $10,000 FTHBI, leaving me $25,500 to put towards my next house. I would have also saved $3,000 on mortgage payments. Now if I hadn’t taken the FTHBI, in 5 years I will have built $38,500 in equity, which after paying my REALTOR®️, would leave me with $27,000 towards my next house.
I know what you’re thinking, you’ll only make $1,500 more, and you saved $3,000, why not take it? Well let’s now see what happens if my home value increased 2% year over year (which is generous, but within the realm of possibility). Not taking the FTHBI will net me around $2,500 more.
With these amounts, I’m not saving any money at 5 years, but by 10 years in, it has switched in favour of not taking it. Not to mention having to repay the full 5% all at once if I did keep my home for the entire mortgage duration. To me, I was sure to choose a mortgage and a home that I could afford comfortably, so that $50 a month doesn’t impact me greatly. On the flip side, making thousands more when I do decide to sell does matter to me. For that reason, I decided to not use the First Time Home Buyers’ Incentive.
I believe that the FTHBI does what it set out to do, improve housing affordability, but the impact that it makes in Atlantic Canada, with the relatively low cost of housing, is fairly minimal. Being sure to purchase a home that fits comfortably within your budget is key to maintaining real affordability. Additionally, being able to make extra payments, even $1000 a year, can reduce your mortgage by years and make a much greater impact than the FTHBI savings.
Andy Tree is a professional Wedding Photographer, marketing expert, coffee lover, millennial, board game enthusiast, and overall nerd. Over the next weeks he’ll fill you in on every step of his search and first home purchase.
Send us a message on Facebook if you have any specific questions or if you’re ready to start you
To buy or not to buy… – The blog of a first time home buyer
Deciding to purchase my first home wasn’t as straightforward a decision as it can be for many people. I currently rent a very nicely built home that doesn’t leave me wanting for much. When something breaks, I don’t have to deal with it. My costs are essentially fixed, mostly everything works, I have enough space for my girlfriend, my cat, and I. Honestly, it’s pretty good living. On the other hand, I’ve rented my current place for 4 years, which means I’ve “thrown away” over fifty thousand dollars. 50 large! Of course, if I had bought a house all that money wouldn’t have built equity, but nearly half of it would have.
I would definitely like to start putting some of that money back into my own pockets, but I’m not in a huge rush since I’m pretty happy with my current living conditions. At the time we were in quite a sellers market, meaning houses were moving fast! If we found something we liked, we’d need to be ready to make an offer right away, which is certainly a little intimidating to a first time buyer.
Next comes figuring out what we’re even looking for. We made a list of some must haves, but were mostly flexible. One major decision is while I’m decently handy, I’m also extremely busy, so we weren’t willing to buy something that needed a lot of work. A few things on our list was a modern kitchen with decent space (since we’re used to a rather large kitchen at the moment), at least a second half-bathroom, a room for a home office (I currently share the space with my entertainment set up, which isn’t perfect for productivity), and lots of natural light.
Figuring out you must-haves right away can certainly help narrow down your search, but be sure to adjust this list as you go to open houses, view listings, etc. You’re going to learn a lot from the first houses you check out, so don’t worry if you don’t have much of a list yet.
Before we started looking too closely, it was important to figure out how much we could afford. Using some handy affordability calculators helped us plan for monthly expenses, but we also needed to consider how much we needed upfront. The minimum down payment in Canada is 5%, but there’s plenty of extra costs, such as property tax, lawyer fees, inspection, land transfer tax, etc. A more realistic expectation is the minimum we’d need is 10%, 5% for down payment, 5% for closing costs. I had to also take into consideration that my main income comes from my small business, which means a varying income year to year, while my girlfriend’s has the comfort of being salaried.
Let me get real with you, another concern I had was the perception of buying a home with my girlfriend, since we’ve only been together for a year and a half and we’re not married. I personally had no doubts about buying a home together, but I did worry a little about the perspective of others. We discussed having the home only in one of our names if we could qualify for a mortgage alone, but ended up deciding to find the house before we stressed too much about it.
With no particular rush, we decided to start casually looking at houses. Realtor.ca is my go-to to see what’s new. Sorting by new and putting a price limit at the top of my budget makes swiping through houses as easy as swiping through tinder!
Andy Tree is a professional Wedding Photographer, marketing expert, coffee lover, millennial, board game enthusiast, and overall nerd. Over the next weeks he’ll fill you in on every step of his search and first home purchase.
Send us a message on Facebook if you have any specific questions or if you’re ready to start your own search!
