blog December 29, 2019

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!

blog December 1, 2019

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