Although these costs may not be actually be ‘hidden’, buyers tend to forget about the necessary yet expensive costs and fees that come along with buying a new home. The last thing we ever want is for buyers to stretch themselves too thin, using all of their savings on a down-payment, only to find out later there are additional fees and costs involved in order for a home transaction to complete. If you’re thinking about buying make sure to account for these ‘hidden’ costs of buying before deciding on that perfect home.
To work out the hidden costs of buying, as a guide, let’s use a brand new 3 bedroom, 2 bathroom Squamish townhome (2000 sq. ft.) that has a purchase price of $600,000 (no first-time buyer or new homes exemptions apply).
Property Transfer Tax
Property Transfer Tax (PTT) is payable on all homes in British Columbia. The amount is 1% on the first $200,000, and 2% on the remainder up to $2 million. After $2 million 3% is payable on the balance. As you can imagine, this can certainly add up and is the last thing a buyer wants to discover after finding the perfect home. Qualifying first-time buyers may be exempt from paying PTT if their home is priced under $475K, there are also partial exemptions for homes up to $500K. Qualified buyers of new homes (new construction) may be exempt for homes up to $750K with partial exemptions for homes up to $800K.
Property Transfer Tax $11,000
A home inspection is an imperative part of purchasing a new home, and eliminates the risk of purchasing a property with hidden defects or problems that could cost the buyer in the future. All buyers should organize a home inspection, and satisfaction of the home inspection report should form part of the binding contract. Mark Goodwin from House Sound Home Inspections in Squamish states, “a home inspection is designed to assess a property as to how it’s performing (within the current environment) and give the buyer facts to make an informed decision whether to go ahead with a purchase or not.” The price of a home inspection varies depending on size, location, age, construction type etc. but for the purpose of our analysis let’s say the cost for the aforementioned townhome is $500.
Home Inspection $500
GST (on a new home)
There is a lot of new construction happening in Squamish and many buyers are interested in buying new homes, townhomes and condos which are subject to Goods and Services Tax (GST). The GST on a new home is 5%, and there is a GST rebate of 36% for homes under $350K with a proportional rebate on new homes between $350K-$450K.
New home GST payable $30,000
Property Tax Adjustments
Property Taxes are adjusted on the purchase of a new home, depending on the date that the home completes (or changes hands). If the seller has already paid property tax on the property for the year, the buyer will need to reimburse the seller the adjusted tax amount that applies after they move in. There may also be adjustments for pre-paid utility bills (water, municipal sewer fees, etc.). If property taxes of $3000 were paid by the seller and the buyer takes possession of the property on September 1st, the buyer would need to reimburse the seller $1000.
Property taxes $1000
A lawyer or notary is required to draft documents and ensure the title of the home is properly transferred. Your real estate agent will be able to recommend lawyers or notaries in the community who can assist with this. Expect to pay around $500 in legal fees during a property transaction.
Legal fees $500
When obtaining mortgage financing generally proof of home insurance is required. This is something the buyer can shop around for. In British Columbia the average household pays $920 a year for home insurance.
Home insurance $920
The amount of fees paid on a mortgage depends on the loan provided and if an insured mortgage is required. Those requiring an insured mortgage (where a deposit is less than 20%) will be charged a mortgage premium of between .60-4.50% applied to the principle of the loan. This additional amount will be paid off over time as the mortgage is paid out so is not necessarily an ‘up-front’ cost.
Whether moving across town or across continent expect to pay moving fees. What may not seem like a lot of money at first (in comparison to the home price), moving costs may feel greater once the finances have been drained on the down-payment, and other fees and costs are accumulating. Moving expenses include storage, packaging, moving truck, fuel and sometimes in-term accommodation. Try budgeting at least $500 for this when purchasing a home, more if you are moving inter-state or inter-continent.
Moving costs $500
Expects fees and charges to reconnect utilities in your new home. These include hookups for hydro, gas, internet, television and phone.
Utility hookups $300
If moving into a townhome or condo, you will under most circumstances be required to pay strata fees which go towards maintenance and upkeep of your complex’s buildings, greenspaces, parking lots etc. Strata fees are usually due on the first day of the month, so expect this charge coming up soon after you move in.
Strata fees $200
On top of the costs listed above there could be other hidden costs such as appraisal fees, land surveying fees, mortgage life insurance, and the cost of new locks. Not factoring in these fees/costs and just looking at the ones listed in detail above the buyer will be looking at approx. $44,420 in extra costs and fees above and beyond the sale price of the home (remember a big chunk of this was GST on a new home).
Having a solid understanding of these hidden costs and fees will give you a better picture of what you can afford and will allow you to discuss financing options with your bank or mortgage broker, fully aware of the real cost of purchasing a home. If you’re looking to buy in Squamish we can refer you to excellent mortgage brokers and lenders, home inspectors, lawyers and more. As Squamish Buyer’s Agents we can answer any further questions about buying in Squamish, and what costs you might be looking at with regards to a specific home.