Purchase FAQ’s
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How do you Benefit from Home Ownership?
Principal Pay Down
- Unlike your rent payment, mortgage payments include a principal component that otherwise brings your total monthly mortgage balance owing down and resulting in an increase of your equity.
Appreciation
- Appreciation refers to the increase in your home’s value over time. Your value may increase for a number of reasons, including interest rate fluctuations, supply and demand, inflationary periods, and even due to emotional house shoppers.
Cash Flow
Whether you’ve purchased a stand-alone rental property or have a rental component to your home, this secondary source of income, ideally above and beyond your total monthly bills, provides great value. For Example
- Rent = $2,500
- Mortgage = $1,500
- Expenses = $500
- Cashflow = $500
Sweat Equity
- Sweat equity refers to the physical improvement of upgrading your home through renovations.
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What is a Pre-approval?
- A true pre-approval is not one that is done on an online pre-approval app or calculator. These options though are a great general tool, they do not address many of the underlining components that ensure accuracy when securing mortgage financing.
- A true pre-approval requires submitting an application, pulling your credit, & submitting supporting documentation to your trusted mortgage advisor.
- At Boychuk Mortgage Group, your pre-approval includes a one-on-one success planning session to help educate you & to create a long-term mortgage & wealth strategy!
- We consider our pre-approvals a guaranteed stamp of approval as we have done the proper due diligence to protect your best interest, in advance of shopping.
- Pre-approvals are a free, no obligation step, put in place to help you understand your unique borrowing power before starting the home buying process with your realtor.
- Your pre-approval rate will be held for 120 days (sometimes more), protecting you should rates rise. This comes with a guaranteed best rate at time of submission.
- Understanding your borrowing power at the time of offer, not only provides you with the upper hand in negotiations, but it gives you the confidence needed to act.
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What Is A Trigger Point?
Each lender with have their own variation, however, here is a general summary:
- For a Conventional Variable Rate mortgage (VRM), the Trigger Point is when the principal amount plus interest owing exceeds 80% of the fair market value of the property as determined by TD.
- For an Insured VRM, the Trigger Point is when the principal amount plus interest owing exceeds 105% of the original principal amount of the mortgage loan.
- For mortgage products with HELOC components (term portions), if at any time the outstanding principal amount (including any deferred interest) exceeds the original principal amount, then the Term Portion has reached the Trigger Point.
You will hit your trigger rate first. Once you hit your trigger point, you will see a payment reset. Therefore, we recommend being proactive once you hit your trigger rate.
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Can I Get a Mortgage on Bare Land?
- Yes
- Typically, a 25 – 50% down payment is required
- There are options at 25% down payment with plans to build
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What is Bridge Financing?
Bridge financing is a short term, temporary loan that is designed to help homeowners like you, “bridge” the gap between the sale of your existing property and the purchase of your new home. This allows you to access your equity for your down payment on your new purchase, while you wait for the sale of your existing home to complete.
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What Are Common Closing Costs On A Purchase?
Land Transfer Tax
In the province of BC, when ownership transfer title, buyers are faced with a land transfer tax – AKA, property transfer tax
- + 1% on first $200,000
- + 2% on balance up to $2,000,000
- + 3% on the balance over $2,000,000
- + 2% on balance over $3,000,000 **If Residential**
Appraisal Fees
- Your lender may ask you to order a home appraisal as part of your conditions. This cost varies depending on property value but are typically between $300 & $500.
Legal Fees
- As the final stage of your home buying process, your legal team (lawyer or notary), are responsible for legalizing your transaction, including registering your mortgage & transferring title. This estimated cost is between $1,500 & $2,500.
Home Inspection
- A home inspection is optional in most circumstance and will cost between $300 & $500.
Home Insurance
- Most lenders will require proof of home insurance at completion. This cost will vary, but you should budget $50 - $100 a month.
Costs of Newly Constructed Homes
- On a new construction purchase, you will likely be required to pay a 5% GST tax at completion, on top of your down payment.
Adjustment Costs
- If the seller has pre-paid property taxes, water bills, or utilities in advance for that year, you’ll need to reimburse them at completion via your legal team’s final adjustments. This can potentially add hundreds to your closing costs. On a positive note, the first few months in your new home will be paid for.
Title Insurance
- Title insurance can safeguard you against fraud. Fees here range from $150 - $300 & are arranged by your legal team.
Down Payment
- Your down payment is the accumulation of funds that make the difference between your total purchase price & your total mortgage.
Minimum Down Payment
- 5% on the first $500,000
- 10% on the next $500,000 up to $1,000,000
- 20% on any purchase over $1,000,000
Moving-In-Costs
- Make sure to budget for last minute expenses such as professional movers, lock smiths, cleaning supplies, etc…
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How to Avoid Paying Property Transfer Tax?
You can avoid or significantly reduce paying the British Columbia Property Transfer Tax (PTT) by qualifying for one of several official government exemptions.
The most common ways to avoid paying this tax are organized below by category:
Residential Buyer Programs
First-Time Home Buyers' Program: You get a full exemption on homes with a fair market value of $500,000 or less. A partial exemption applies up to $835,000. You must be a Canadian citizen or permanent resident, have lived in BC for 12 consecutive months before purchasing, and have never owned a principal residence anywhere in the world.
Newly Built Home Exemption: You receive a full exemption if you buy a newly constructed home with a market value up to $1.1 million. A partial exemption applies to homes valued between $1.1 million and $1.15 million. You must move into the home within 92 days and use it as your primary residence for at least one full year.
Family and Relationship Transfers
Principal Residence Transfer: You can transfer a primary home to a "related individual" (spouse, child, parent, sibling, or grandparent) tax-free. The property must be a true gift where no money changes hands, and the land cannot exceed 0.5 hectares.
Marriage or Relationship Breakdown: Property transfers resulting from a separation agreement or court order under the Family Law Act are entirely exempt from the PTT.
Recreational Residence Transfer: You can transfer a vacation or recreational property to a related individual tax-free, provided the entire property's market value does not exceed $275,000.
Family Farm Transfers: Passing a family farm to a family member or a family farm corporation is exempt if the land continues to be used for active farming.
Commercial and Investment Exemptions
Purpose-Built Rental Buildings: New rental buildings with at least 4 separate apartments are completely exempt from the general property transfer tax if purchased between January 1, 2025, and December 31, 2030. They are also exempt from the further 2% tax on residential values exceeding $3,000,000.
Legal and Administrative Exemptions
Correcting an Error: Transfers made purely to fix a conveyancing error on a previous title registration are not taxed.
Bankruptcy or Subdivisions: Property transfers resulting from bankruptcy or the formal subdivision of land can qualify for specific exemptions.
Registered Charities: Transferring real estate to a registered Canadian charity is exempt from PTT.
To ensure your specific scenario qualifies without penalties, you should always consult your real estate lawyer or file the appropriate forms directly through the BC Land Title Office.
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What is the Easiest Way to Get into A Detached Home?
HOUSE HACKING!
- This strategy refers to living in one part of the home while renting out the rest of the space. House Hacking is designed to help you improve what you can qualify for while also bringing down your total monthly costs via the rental income generated.
- When comparing a detached home to a strata unit, you will also save on monthly strata fees. When done right, you may even find yourself cash flow positive month over month.
Remember a $400 monthly debt today equates to about $100,000 in lost borrowing power. When considering the elimination of a $400 monthly strata fee, that could mean an increase in your total borrowing power of about $100,000.
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What are My Typical Homeownership Costs?
Common home ownership costs include:
- Mortgage Payment
- Property Taxes
- Home Insurance
- Strata Fees (If applicable)
- Utilities – Heat, Water, Gas
- Internet & Cable