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.
You’ve found a house you love (or like, it doesn’t have to be a love-at-first-sight kind of deal) and you’re ready to make an offer, what happens next?
Firstly, this process is going to be an exercise in teamwork and trust between you and your REALTORⓇ, which is why it is so important that you choose the right one for your needs! For my home, my offer was pretty simple. There was only one back-and-forth negotiating price (I’ll be honest, I didn’t want to push hard, I really just wanted to be sure we got it!). Rob had to negotiate his cut, because the home I wanted was listed privately, otherwise everything from the offer standpoint went very smoothly.
The offer itself might sound like an intimidating document, but it is really just this information broken up:
- Your name(s), the seller(s) name(s), and the address of the property
- This one’s pretty obvious
- The price you’re offering to pay
- This price does not include any applicable CMHC fees that would be added to your mortgage if you pay under a 20% deposit.
- Extra items you want included
- The general rule is that if you turned the house upside down and the object didn’t move, it is assumed to be included in the house. Usual items include window coverings (like blinds), bathroom mirrors, and major appliances. If there’s a storage unit, rolling kitchen island, etc., you can always see if the seller is willing to keep it as a part of the home, but keep in mind the more you ask for, the less the sellers will be willing to negotiate price.
- The date you’d like to take possession
- This is your closing date, or the day you’ll take legal ownership of the property (typically at the end of the business day, so I recommend you don’t plan to move on this date)
- The date and time the offer expires
- A date and time set between you and your REALTORⓇ for when this offer expires. Typically you do not give much time to encourage a quick acceptance or counter.
- All other conditions to be met
- This includes the offer being conditional on a satisfactory home inspection. The inspection (which is at your own cost), may turn up unknown issues which will cause you to adjust your offer or walk away. You also might have agreed upon something being fixed, changed, painted, etc. Lastly, it will often ask for a disclosure statement, which is a document signed by the current owner disclosing any issues or repairs that they know of while they lived in the home.
You’ll fill in these details with your REALTORⓇ and likely submit the offer online. If you’re like me, you’ll be almost holding you breath waiting for the response, but be patient! Hopefully you’ll hear back by your offer’s expiration time (you might not though). When you do hear back, one of four things will happen:
The Offer is accepted: Yay! Your offer was reasonable and the sellers have agreed to all your terms. Move on to next week’s blog post because you have an accepted offer!
The Offer is rejected: On no! To the seller, your offer wasn’t reasonable enough to bother countering, and it has been rejected altogether. Your REALTORⓇ might be able to get some more inside information about why, but don’t get too discouraged! You could always write another offer or continue your search.
Your Offer is countered: The most likely outcome is that your offer is countered. They might agree with some of your conditions, they might counter back at a different price, they might not like the proposed closing date, etc. There’s a million reasons your offer could be countered, but now it’s your decision on what to do.
You enter into a multiple offer situation: In the case where multiple parties put in an offer on the same property, you might have to adjust your offer to “beat” out the other offer(s). You wouldn’t see this on a counter, but you’d find out from your REALTORⓇ.
No matter what you hear back, what you do next is up to you! You can continue negotiations, you can walk away, or you can accept their offer and move forward. Your REALTORⓇ will likely have advice, particularly if they’re an experienced negotiator. At the end of the day you’ll either have an accepted offer (so look out for next week’s post) or you’ll be continuing your search.
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!