AS LITTLE AS 5% DOWNPAYMENT AND IN SELECT CASES, WITH AS LITTLE AS 0%
DOWNPAYMENT
At the present time, all buyers including first time
buyers can purchase a home for as little as 5% down (conditions apply - see lenders
for details).
Although it may sound complicated, it is a relatively
straightforward process.
If you have between 5% downpayment and 20%
downpayment, you will apply for a "High Ratio" mortgage. The process
is only slightly different than applying for a regular or "Conventional"
mortgage (i.e. 20% downpayment or greater).
A high ratio mortgage requires high ratio mortgage
insurance which is just like any other type of insurance. It insures against risk.
It protects the lender against the risk of default of repayment. In Canada, non-private
lenders can only legally lend up to 80% of the appraised value of a home (hence,
conventional mortgage financing). But with high ratio mortgage insurance, lenders
can lend as much as 95% of appraised value (high ratio mortgage financing).
Some of the costs you will encounter when
buying a home:
- Home Inspection fee - the cost varies from $275 -
$400 and up depending on the complexity of the inspection, the size of the home.
- Mortgage Appraisal fee - the cost of an appraisal
ranges from about $150 - $250 and up for larger homes.
As previously mentioned, some mortgage brokers charge an application fee.
- High ratio mortgage application fee - this is payable
if you have less than 25% downpayment and the cost is around $165.
- Land Surveyors fee or Title insurance fee - the cost
varies and Annette and your lawyer can advise you on the differences.
Sometimes, the seller of a home will have an existing survey that he/she can pass
along to you at no additional charges. Often, this will meet the requirements
of your mortgage lending institution and solicitor, if there are no significant
additions or improvements to the property since the time that the survey was completed.
- Land transfer tax - this is a tax payable by all
home purchasers in the province of Ontario. Annette will assist you in calculating
the amount of the land transfer tax. This tax varies according to the purchase
price of the property.
- GST - this is applicable on new construction. You
do not have to pay GST on the price of a "used" residential home. In
basic terms, a "used" residential home is one that has been owner occupied
in the past. There are other considerations regarding GST and Annette can consult with
you on these aspects.
GST is also applicable on all services (legal, appraisal, etc.) related to the
real estate transaction.
- Legal fees - the cost in having a lawyer close the
transaction is made up of various components: his/her legal fee + GST + disbursements
+ the law society levy. It is best to consult your lawyer directly on the breakdown
of these costs.
- Other costs - "adjustments" - an adjustment
occurs when a seller has prepaid something, like property taxes or utilities.
There are other adjustments which Annette, your lawyer and your mortgage lender
will advise you on.
- Property taxes, maintenance costs, and utility bills
- they begin on the day you take possession of your new home. Annette can give
you "rules of thumb" or help you in budgeting for these expenses.
- Moving costs - renting a truck or hiring a professional
mover - the more of the move that you can do yourself, the less costly. Don't
forget to save a bit of money to order food in for your first evening. The last
thing you want to do after moving all day is prepare a meal!
- Household Insurance - contact your insurance agent
or insurance broker for quotes on fire/theft/liability insurance. Your insurance
professional will review all of your insurance options with you.
The threshold for the First Time Home Buyer's program
-- which exempts those buying their first home from paying the property transfer
tax -- was increased to $425,000 from $375,000. In addition, buyers will no longer
be required to have a mortgage of at least 70 per cent of the purchase price to
qualify. As an added bonus, owners who leave home for up to two taxation years
for travel, work or schooling will still be eligible for the home-owner grant
or low-income grant supplement.
