Whether you are a first time home buyer or an experienced investor in real estate, you can easily overlook costs associated with a real estate transaction. Lulu recognizes how stressful these surprise expenses can be so she has provided you with the following list to consider.
· Property Transfer Tax - This provincial tax calculated at 1% of the purchase price up to $200,000 and 2% on any amount from $200,000 to $2,000,000; 3% on any amount from $2,000,001 to $3,000,001; and 5% over $3,000,001. If you are a first time homebuyer and your purchase price is less than $500,000, then you will be exempt from this tax.
· Interest Adjustment - This is often deducted by the bank directly from your mortgage payment account on the interest adjustment date and is the interest you will pay for receiving your mortgage money before the official start date of your mortgage.
· Property Tax and Utility Adjustment - The taxes and utilities will be adjusted in the Statement of Adjustments. Taxes are based on the calendar year between January 1 and December 31 and are usually due the first business day in July. Utilities can be billed yearly, quarterly or monthly and sometimes a special metre reading is required. If the due date is before the completion date the Seller will be responsible for paying the tax bill. If the due date is after the completion date then the purchaser will be responsible for remitting the payment. Whoever pays the bill will be credited for the number of days that they do not have ownership of the property in that calendar year.
· Strata Forms and Adjustments - If you are purchasing a strata property, your lawyer will need to order certain documents from the strata corporation in order to be able to close on the property. This cost will be included in your statement of adjustments provided to you by your lawyer or notary.
· Property Appraisal - This may be a requirement of your lender and is usually completed at the time your bank gives you its mortgage commitment. Not all lenders require a property appraisal but it is good to keep this cost in mind, as it may be a requirement from your lender.
· High Ratio Mortgage Insurance - Canadian Law requires lending institutions to insure mortgages with less than 20% down payment/equity. The premium is a percentage of the mortgage and is added to the mortgage amount and which will be deducted from your net mortgage proceeds.
· Property Inspection - This is usually done at the discretion of the purchaser, although this is something that Lulu highly recommends. An inspection is a thorough evaluation of the structure, systems and components of the home. The inspection report is usually multi-paged and comments on the condition of, but not limited to foundations, electrical, plumbing, heating, water heaters, appliances, fireplaces, drainage, roof, walls, floors, attic, crawl spaces and patios. The inspection is preformed while a conditional offer is in place which gives the Buyer the tools and necessary information to decide as to whether or not they would like to proceed with buying the home.
· Title Insurance - Title Insurance is required by the bank in the absence of a survey.
· Econveyance Fees - By using electronic registration, Lawyers and Notary's are able to extend the hours of possible registration of the property after 3 pm and gives them greater flexibility to complete the transaction.
· Legal Fees - You will require a Lawyer or Notary to complete the Real Estate transaction. If you are Buyer, your lawyer will work with the Seller's lawyer to ensure title of the home is removed from the sellers name and into yours on completion date and vice versa if you are a Seller.
· Real Estate Commissions - If you are Selling your home, you will be responsible for paying Real Estate Sales Commissions. If you are a buyer, you do not have to pay real estate sales commissions.