Important Costs to Consider
It’s a common mistake to overlook closing costs and additional expenses when budgeting for your new home or condo purchase. We’ve outlined some of the required costs to help you better understand exactly how much you can afford.
A mortgage down payment is the amount of money you pay up front when purchasing a home. A deposit that is applied toward your down payment is required when you make the offer to purchase. Your down payment must be at least 5% of the purchase price for under $500k. For properties with a purchase price between $500k – $1 million, the minimum down payment jumps to 10%. For mortgages over $1 million the minimum down payment starts at 20% of the purchase price. If you are looking to spend over $1.2 million you should speak to your lender as the down payment will vary depending on the lending institution’s guidelines.
Property Transfer Tax:
Calculated as a percentage of property value, these taxes are due on closing. Based on the purchase price of the property, the tax rate will vary per province, but keep in mind that Vancouver home buyers incur an additional municipal tax. The city also offers land transfer tax rebates for first-time home buyers. You can find a great Land Transfer Tax Calculator that will show you the exact amount here: forms.gov.bc.ca/taxes/estimate-yourproperty-transfer-taxes/
Mortgage Default Insurance:
There are three main mortgage insurers in Canada, with Canada Mortgage and Housing Corporation (CMHC) the most recognizable. Mortgage default insurance is mandatory in Canada for down payments of less than 20%. Although default insurance protects lenders, it allows Canadians access into the real estate market with a smaller down payment.