Anticipate expenses related to the purchase of a property and the down payment
In addition to the sale price of the property, the purchaser of real estate must provide for several costs related to the transaction. Here is a list of expenses to consider when buying a property:
Down payment to buy a property
The down payment is the amount that the lending institution will require to provide a loan. A minimum down payment of 5% of the value of the property is required for a detached house, a divided condominium or a duplex. The minimum down payment is 10% for a triplex or a building of up to 4 units. In the case of an undivided co-ownership or a property that will not be the principal residence of the buyer, a down payment of 20% will be required. For the Closing Costs in Santa Cruz, CA this is important.
The difference between the property divides and undivided
If the down payment is less than 20% of the market value of the property, the buyer must purchase mortgage insurance. The premium to be paid for this insurance varies from 0.5% to 2.90% of the total sum borrowed. The process for obtaining this insurance coverage is made by the lending financial institution. The premium can be added to monthly mortgage payments or paid in full on the day of transfer of the property.
The deposit (or down payment) to buy a property
The buyer does not have to make a deposit when buying a property. He may agree with the seller on the payment of a deposit when submitting an offer or when the conditions of an accepted offer are fulfilled.
If the parties agree on the payment of a deposit, the amount will be indicated in the offer. Lawyers and notaries recommend that the deposit be made to the notary of the buyer “in trust” and not in the name of the owner.
Transfer tax (Welcome tax)
Transfer taxes are collected by the municipality a few weeks or months after the conclusion of the notarial deed. They vary according to the value of the property.The calculation is made as follows considering the higher of the two amounts that is the one paid for the property or that of the municipal evaluation:
- 5% on the first $ 50,000
- 1% on the $ 50,000 to $ 250,000 portion
- 5% on the $ 250,000 and over
Here’s how to calculate the transfer tax for a property worth $ 280,000
0 – $ 50,000 = $ 50,000 x 0.5% = $ 250
$ 50,000 – $ 250,000 = $ 200,000 x 1% = $ 2,000
$ 280,000 – $ 250,000 = $ 30,000 x 1.5% = $ 450
Calculation: $ 250 + $ 2000 + $ 450 = $ 2700 to pay
For properties purchased in Montreal, a percentage of 2% must be calculated for the value range exceeding $ 500,000.
Pre-purchase inspection fees
Most buyers will use the services of a building inspector to check the condition of the property before purchasing it. The cost may vary depending on the type of property, size and age of the house. $ 500 or more is required to complete this inspection.
Before making a decision, the buyer should ensure that the inspector is part of an association and has insurance coverage for errors and omissions.