"Hidden" fees in the cost of purchasing a home - did YOUR REALTOR advise you?

Besides the minimum 5% downpayment required to purchase and home, there are several other costs that can come up - it is important for REALTORs to discuss this with their buyer clients so that they can budget and are aware of what their total purchase costs will actually be.

They include:

Mortgage insurance -- If you have a high-ratio mortgage, the government requires that it be insured against default and that you pay the cost of insurance. The cost to you ranges from .51 to 2.90 per cent of the mortgage amount and is added to the mortgage principal.

Property and title insurance - Besides high-ratio mortgage insurance, mortgage lenders require your client to have property insurance in place. This insurance covers the cost of replacing the structure of your home and the premiums depend on the value of your home, according to CMHC. The lender may also recommend title insurance. For a home worth $500,000, the cost would be about $350

Appraisal fee -- While it’s beneficial to know how much any prospective house your client is looking at is worth in order to negotiate price, home appraisals are also used to protect the lender’s interests. It’s likely a lender will ask for a recognized appraisal in order to complete a mortgage. Usually, the cost of an appraisal ranges from $250 to $350. However, some lenders will pay for the appraisal fees to get the business.

Home inspection -- an independent look at the house and property can cost in the $350-500 range for most single-family homes. Home inspections are recommended to identify if there are any other potentially costly expenses – issues not visible to the naked eye – that may impact the costs and upkeep of the home.

Property survey -- always a good idea, but not always carried out. A land surveyor can make sure the buyer is getting the property they think they are buying. A surveyor can properly install property markers on the corners of the lot. With those, the buyer will precisely know the boundaries.

Water testing -- for properties not on a municipal water system, most - if not all - financing institutions require the water source to be tested to ensure it meets standards for human consumption. Some areas also have compounds in the water the prospective buyer may wish to know about.

Status certificate fee -- When making an offer to purchase a condominium, it’s a good idea to ensure an offer is conditional upon obtaining and having time to review an Status certificate. This fee (not applicable in Quebec) applies when buying a condominium or strata unit and could cost up to $100.

Land transfer tax -- Land transfer tax is specific to each province and is a percentage of the purchase price, usually 0.5%. However, provinces such as Alberta and Saskatchewan have no land transfer tax, while others offer a full or partial exemption for first-time buyers.

Legal Fees -- A lawyer will help protect your clients legal interests and negotiate the terms of any offers made. Legal costs will depend on the complexity of the transaction and the lawyer’s experience.

Prepaid property tax or utility bills -- If a closing date is mid month, a seller may have already prepaid taxes or utility bills. Buyers should be prepared to reimburse the seller for prepaid property tax and utility bills should they request it.

Mortgage application fee --Some lenders may charge a fee to process your mortgage application. However, with the highly competitive nature of the mortgage industry, many will waive the fee entirely, especially if you have other accounts with them.

Mortgage broker's fee -- If you use a mortgage broker to find you a lender, you may be charged a fee which is payable at the time of closing when the mortgage transaction is complete. In many cases, brokers are paid directly by the lenders, so you should ask the mortgage broker about who pays the fee.

Contact me if you want a complete rundown of the purchase process and want a dedicated REALTOR to protect your interests.