"Ask a Realtor" appears Thursdays. Have a real estate question for Susanne? Please email her at firstname.lastname@example.org, and she will publish and answer the questions of most general interest.
Q. What are all the costs I need to consider before knowing whether I can still afford to buy a new place?
Take heart, this is a daunting task but it is just a matter of making sure you know all the costs upfront. So, before you set out to look for a house or condo you should make an appointment with your lender, be it your bank or your mortgage broker. They will determine how much you can spend by doing a debt:income ratio analysis to determine the amount of mortgage that you will qualify for. The market has changed and you can expect to pay more...so get ready!
What will my lender or mortgage broker need?
They will need to do a credit check and you will have to provide them with proof of income and an employer's letter. You will need a down payment of at least five per cent of the purchase price and if it is less than 20 per cent, your mortgage will have to be CMHC insured. Your lender will determine the price range for properties you are able to afford -- a combination of your down payment and the amount of the mortgage you will need. The new property will be appraised by the lender before closing.
What are the monthly carrying costs for a house or condo?
If it's a house, you have heat and hydro, cable, water and realty taxes to pay. And of course there will be ongoing minor repairs, occasional major repairs, snow shovelling, gardening, etc. If it's a condo you pay a monthly maintenance fee that typically includes common area expenses, building insurance, parking, and water. Sometimes heat is included but you usually pay for your own hydro. You also pay your own taxes, usually your own cable and if your own hydro, it includes hydro costs for central air.
What is bridge financing and will I need it?
If you have a property to sell but buy first, bridge financing is the amount you may need to borrow to carry both the new property and the old property for a short period of time. This happens if you have to pay for both mortgages because the new property closes earlier than your current property. A month overlap is typical. Speak to your lender about this.
At the offer stage you may make the offer conditional on a home inspection, the cost of which depends on the size of the house (approx. $450 for a three-bedroom home). You will pay your lender a mortgage appraisal fee and a home appraisal fee. At the time of closing your lawyer will co-ordinate this and you will also pay the Land Transfer Tax if applicable in your province.
In Toronto, there are two: One for the province and one for the municipality. You will also pay the legal fees as well as adjustments (real estate taxes prepaid, gas in the furnace etc.) and disbursements. Add to this the cost of moving. And don't be shy about asking your lender or your lawyer to double check your calculations!