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Important Notice

As of February 15, 2016, the minimum down payment requirement for mortgage loan insurance depends on the purchase price of the home. For a purchase price (or lending value) of $500,000 or less, the minimum down payment is 5%. When the purchase price (or lending value) is above $500,000, the minimum down payment, as a percentage of lending value, is 5% for the first $500,000 and 10% for the remaining portion.

Example:

For a home with a purchase price (or lending value) of $600,000, the minimum down payment required is:

= 5% of $500,000 + 10% of $100,000
= $25,000 + $10,000
= $35,000

The Costs of Your Home Purchase


The Costs of Your Home Purchase

Introduction Slide

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Slide 1

(Visual) Header Text: Canada Mortgage and Housing Corporation, Homebuying Step by Step

(Visual) Title: The Costs of Your Home Purchase

(Visual) Footer: Canada Wordmark and Canada Mortgage and Housing Corporation Logo with Home to Canadians tagline.

Beyond the purchase price of a home, there are a number of other upfront costs involved in buying a home. Become familiar with these costs, so you are financially ready for them and are able to minimize unexpected financial surprises.

Slide 2

(Visual) Header Text: The Costs of Your Home Purchase

(Visual) Subtitle Text: In this presentation, we will cover:

(Visual) Disclaimer: Estimates of costs are provided in some instances throughout the presentation for illustration purposes only. Actual costs could vary depending on individual circumstances. It is recommended that home buyers explore the actual cost of these items relevant to their specific home purchase transaction.

(Visual) Footer: www.cmhc.ca and Canada Mortgage and Housing Corporation Logo with Home to Canadians tagline are used throughout the presentation

From making an initial deposit to buying window treatments and gardening equipment, you will need to cover a variety of expenses along your way to homeownership. This presentation will provide you with insight into the expenses that you may face at each point in the homebuying process.

Please note the cost estimates provided throughout this presentation are for illustration purposes only. Actual costs could vary depending on individual circumstances.

Slide 3

(Visual) Header Text: The Upfront Costs of Homebuying

(Visual) Subtitle Text: Cost will be incurred when:

It takes time to purchase a home. From the day you make an offer to purchase to the day you move in, you will face costs at different times throughout the process, including:

  • When making an offer to purchase
  • When finalizing a conditional offer to purchase
  • When preparing for closing day
  • On closing day
  • When you are settling into the home

Let’s take a closer look at the costs you may encounter in each of these steps in the homebuying process.

Slide 4

(Visual) Header Text: Making an offer to purchase

(Visual) Subtitle Text: Making an offer to purchase

Step 1: Making an Offer to Purchase

The main cost that occurs when making an offer to purchase is the required deposit.

Slide 5

(Visual) Header Text: Making an offer to purchase

(Visual) Subtitle Text: The deposit

(Visual) Text on Slide: Provides the sellers with cash assurance that you are serious about the offer, Is required when you make an Offer to Purchase, Cost varies, but may be up to 5% of the purchase price

The deposit provides the sellers of the home with some sort of cash assurance that you are serious about the offer. The amount of the deposit can vary and may be up to 5% of the purchase price. The deposit is considered to form part of your down payment.

Slide 6

(Visual) Header Text: Finalizing the offer to purchase

(Visual) Subtitle Text: Finalizing the offer to purchase

(Visual) Text on Slide: Appraisal Fee, Home Inspection Fee, Water Testing and Septic Tanks

Step 2: Finalizing the Offer to Purchase

Once an offer to purchase has been made, it is likely subject to various conditions such as obtaining approval of financing from your Mortgage Professional, a home inspection, and an appraisal.

Slide 7

(Visual) Header Text: Finalizing the offer to purchase

(Visual) Subtitle Text: Appraisal fee

An appraisal is an estimate of the value of the home. A mortgage professional may ask for you to cover the cost of having the property appraised. This ensures that there is an accurate estimate of the value of the home for financing purposes. The cost is usually between $250 and $350 and is paid at the time you contract for those services.

Slide 8

(Visual) Header Text: Finalizing the offer to purchase

(Visual) Subtitle Text: Home inspection fee

A home inspection is done by a professional who provides a report on the condition of the home. It can help you to be informed about potential problems with a home before you make the final commitment to buy.

It is recommended that you make a home inspection a condition of your offer to purchase. It generally costs around $500, depending on the complexities of the inspection.

Slide 9

(Visual) Header Text: Finalizing the offer to purchase

(Visual) Subtitle Text: Water testing and septic tanks

In rural areas, homes may not have connections to municipal water and sewer lines; instead, they rely on privately owned or communal (shared) wells and individual septic systems.

Homeowners must ensure that their well water is safe to drink and that their well and septic systems are properly maintained. This makes it important to conduct a detailed inspection of both the well and the septic system before purchasing a home. Often, you can negotiate these costs with the vendor and list them in your offer to purchase.

Slide 10

(Visual) Header Text: Preparing for closing day

(Visual) Subtitle Text: Preparing for closing day

Step 3: Preparing for Closing Day

Once an offer to purchase has been finalized and all of the conditions have been met, it is time to work with your Mortgage Professional and lawyer in preparation for Closing Day. This will include ensuring that property insurance is in place and obtaining a survey or certificate of location. An Estoppel Certificate may be necessary if you are purchasing a condominium.

Slide 11

(Visual) Header Text: Preparing for closing day

(Visual) Subtitle Text: Property Insurance

Property insurance covers damages to your home following a fire or other unforeseen circumstances. Before funding your mortgage loan on closing day, your Mortgage Professional will want to ensure that property insurance covering the cost of replacing your home and its contents is in place because the home is the security for your mortgage loan.

Slide 12

(Visual) Header Text: Preparing for closing day

(Visual) Subtitle Text: Survey/Certificate of Location

A Survey or Certificate of Location shows the property boundaries and measurements and specifies the location of buildings on the property. This document will confirm whether all buildings fall within the property boundaries and whether there are any easements or encroachments.

  • An easement is where someone else has the right for access to or over another person’s land for a specified purpose, such as a driveway or public utilities.
  • An encroachment is where a fence, building or other structure extends onto another person’s property.

Your Mortgage Professional may ask for an up-to-date Survey or Certificate of Location before finalizing the mortgage loan. This is often available from the seller. If the seller does not have one or does not agree to get one, then you will have to pay for it yourself. It can cost in the $1,000 to $2,000 range.

Slide 13

(Visual) Header Text: Preparing for closing day

(Visual) Subtitle Text: Estoppel Certificate / Status Certificate

This step applies only to potential condominium buyers.

A Mortgage Professional may wish to confirm that items such as condo fees for the unit have been paid and are up to date. Typically this information is provided by an Estoppel Certificate or Status Certificate. This outlines a condominium corporation’s financial and legal state. The fee for obtaining an Estoppel Certificate could be up to $100.

Slide 14

(Visual) Header Text: On closing day

(Visual) Subtitle Text: On closing day

Step 4: Closing Day

Once all of the details in preparation for closing day have been taken care of, you are ready for closing day. Different costs can be required to be paid on closing day, including:

  • The down payment
  • Mortgage loan insurance premium
  • Land registration fees
  • Pre-paid property tax and utility bills
  • Legal fees/disbursements
  • Title insurance

We will review each of these items in more detail.

Slide 15

(Visual) Header Text: On closing day

(Visual) Subtitle Text: Down payment

Your down payment is the portion of the home price that is not financed by the mortgage loan.

  • The down payment is required before the mortgage can be advanced.
  • A minimum down payment of 5% of the home’s purchase price is required.
  • If you contribute less than 20% of the home price as a down payment, you will typically need a high-ratio mortgage — which usually requires mortgage loan insurance.

Slide 16

(Visual) Header Text: On closing day

(Visual) Subtitle Text: Mortgage Loan Insurance Premium

(Visual) Text on Slide: Required where the down payment is less than 20% of the purchase price, Can be added to your mortgage or paid in full upon closing,Typically ranges from 1.80% to 3.85%

To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments. The premium payable is based on the  percentage of the mortgage amount. It typically ranges from 1.80 to 3.85  percent.

Slide 17

(Visual) Header Text: On closing day

(Visual) Subtitle Text: Land registration fee

The Land Registration Fee is sometimes called a land transfer tax, deed registration fee, tariff or property purchases tax.

You may have to pay this provincial or municipal charge upon closing in some provinces and territories. The cost is a percentage of the property’s purchase price and may vary, so it is best to check the current rates with your lawyer/notary.

Slide 18

(Visual) Header Text: On closing day

(Visual) Subtitle Text: Pre-Paid Property Taxes and/or Utility Bills

As part of the financial transactions on closing day, you may be required to reimburse the seller of the property certain pre-paid costs.

For instance, if the seller has paid property taxes for the year, you will be required to reimburse the property taxes for the portion of the year that you own the home.

Slide 19

(Visual) Header Text: On closing day

(Visual) Subtitle Text: Legal Fees and Disbursements

When purchasing a home, you need a lawyer (or notary in Quebec) to protect your legal interests. Having a lawyer/notary involved in the process will give you peace of mind and ensure that things go as smoothly as possible. Lawyer/notary fees depend on the complexity of the transaction and their experience and are to be paid upon closing. The estimated minimum cost is $500.

Slide 20

(Visual) Header Text: On closing day

(Visual) Subtitle Text: Title Insurance

Title Insurance provides you with insurance against loss or damage caused by a matter affecting the title to the property, in particular by a defect in title or by the existence of a lien or encumbrance on the title. Your lender or lawyer/notary may suggest title insurance to cover loss caused by such defects of title.

Slide 21

(Visual) Header Text: Settling into your home

(Visual) Subtitle Text: Settling into your home

Step 5. Settling into Your Home

Besides upfront costs, there are other expenses to consider when settling into your home.

Slide 22

(Visual) Header Text: Settling into your home

These costs can include:

  • Moving expenses
  • Service hook-up fees for utilities. You may also be required to pay a deposit for utilities such as telephone and heating services.
  • Immediate renovations or repairs
  • Tools, gardening equipment and snow-clearing equipment
  • Appliances, depending on what comes with the house
  • Window treatments: check to see what comes with the house
  • Decorating materials: including paint, wallpaper, flooring and tools for redecorating
  • Hand tools: you will need some basics for your new home
  • Condominium fees: you may have to make the initial payment for these monthly fees

Slide 23

(Visual) Header Text: The upfront costs of homebuying

(Visual) Subtitle Text: Cost will be incurred when:

You are now familiar with the different costs associated with purchasing a home. What you’ve learned will help you minimize surprises and make the move as smoothly as possible.

Slide 24

(Visual) Canada Mortgage and Housing Corporation Logo with Home to Canadians tagline and Canada Wordmark

(Visual) Disclaimer: This presentation is not intended to provide financial or other advice and should not be relied upon in that regard. The information (including the assumptions and examples) it contains are provided for general illustrative and estimative purposes only, and does not take into account the specific objectives, circumstances and individual needs of the reader. All information is provided on an "as is" basis without warranty or representation of any kind, express or implied and it is not intended the reader will rely on this information without verifying the full terms of CMHC underwriting policies. The reader should be aware that other conditions, requirements and restrictions may apply and that the information is subject to change without notice. CMHC assumes no responsibility or liability of any kind in connection with the information provided. CMHC and the names of any CMHC products and services, as well as any logos or drawings are trademarks, registered trademarks or official marks of CMHC.© 2012, Canada Mortgage and Housing Corporation. All rights reserved.