- So, you own your current home and are now looking to make that big jump to your new family home, but you just don’t know what steps to take or to know if the timing is right.
- Whether you’re looking to move to a bigger condo or townhouse, upgrade to a detached home or a better neighbourhood, we’ve got you covered!
- There are many moving parts to a real estate transaction, not to mention two, and this is why it is essential to have an experienced team working for you.
- We understand that buying a home is one of the most significant purchases in a lifetime, so our trusted team of mortgage experts are here to help make your move a smooth, stress-free process from start to finish.
- We know there are many questions that you may have pertaining to your budget: whether you should sell or buying first, what the transactional costs are, and what your options are to port your current mortgage, and so much more. Let’s look below at our some of the frequently asked questions associated with selling and buying in today’s real estate market.
- Should I Purchase My New Home First Then Sell My Existing Property?
- I Don’t Have Funds for A Deposit, My Down Payment is in My Home…Now What?
- Do My Closing Dates on My Sale & Purchase Have to Match Up?
- What are the Costs that Come with Selling My Current Home & Buying a New Property?
- Now on the Other End, What are Your Costs to Selling Your Home?
- How Do I Calculate My Required Down Payment?
- How Much of A Down Payment Do I Need?
- Can I Stay with My Same Lender?
- This is a tricky question and will often come down to factors pertaining to your situation, the current market, what sort of back-up plan you have in place, and your overall needs.
- Where there is no right answer here, selling your home first will be the safer option. Selling your home before making your next purchase will give you a better understanding of your overall budget. Selling first will also allow you to use the proceeds from your sale towards the purchase of your new home. On the other hand, the risk of selling your home first means you may not be able to find a new home and complete on that purchase with the same closing dates as your current sale.
- Alternatively, purchasing your next home first will give you the reassurance that you found the home of your dreams, but it comes with the risk that you may not sell your home at the expected price you were hoping for as you are much more motivated to sell now. In this case, you may also not be able to align the closing date of your home sale with your new home purchase. Even more worrisome, you may not be able to sell at all if there are any major changes to the market during this time.
- If you find yourself in a position where you can’t close on your new purchase because your current home won’t sell, it’s not just your deposit that you will likely forfeit, but you may find yourself in a legal dispute.
- Because there are many moving parts to your next real estate purchase, speak with one of our trusted advisors and we can ensure that you are making the right decisions for you and your family.
- If your down payment is stuck in the equity of your home without any secondary source of funds to put towards your purchase deposit, then deposit financing might be for you.
- A deposit is different from a down payment and demonstrates the buyer’s good faith to close on their purchase agreement. If you find yourself needing these temporary funds, there are options available.
- How Does Deposit Financing Work?
- A firm sale contract for your current home must be provided.
- The funds leant are secured against your current home.
- The amount borrowed for your deposit on your new home must be paid back in full once the sale of your correct home completes.
- It’s important to note, if the completion date of your current home falls after the completion of your newly purchased home, you may also require bridge financing to help bridge the gap of your required down payment between closing dates.
- Ideally, you would want to close on the sale of your existing home before the completion of your new purchase as this allows you to receive the funds from the sale of your home to put towards the down payment on your new purchase.
- In cases where the sale of your current home takes place after the completion of your new purchase and your down payment is coming from your sale, bridge financing will be an option that helps you bridge the gap of your down payment between purchase and sale closing dates.
Let’s take a quick look at the typical costs associated with buying your new home:
- Land Transfer Tax
In the province of B.C., when ownership transfers title, the buyers are faced with a land transfer tax, also referred to as 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**
Please note that there are some exemptions from this tax for first time home buyers, and new built properties.
- 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 and transferring title. This estimated cost is between $1,500 & $2,500.
- Appraisal Costs
- Your lender may ask you to order a home appraisal as part of your conditions to confirm the value of your home. In many cases with a down payment of less than 20%, we can have this appraisal completed at no cost to you. However, if required, this cost may vary depending on property value, property location, and whether there is a rush on the report; however, we typically recommend a budget of $300 - $500.
- Home Inspection Cost
- A home inspection is optional in most circumstances. This cost may vary depending on the uniqueness of the property and if there is a rush on the report, but we typically recommend budgeting between $500 - $800
- Other typical costs may include a home insurance policy, GST, adjustment costs, title insurance, your down payment, & moving fees.
- Realtor Fees
- Realtor fees are typically paid by the seller of a real estate transaction in Canada and will be based on the terms you and your realtor set forth.
- Legal fees
- Just like when buying your new home, your legal team (lawyer or notary), will be responsible for legalizing your real estate transaction. This estimated cost is between $1,500 & $2,500.
- Mortgage Penalty Fees
- This penalty is the number one cost when moving from one home to the next and takes place when you are selling a home that has an existing mortgage in place.
- Depending on the mortgage product you are in, this penalty can range from 0.5% to upwards of 8%-10% of your mortgage balance. To minimize this cost, we always recommend taking advantage of your pre-payment privileges that otherwise reduce your overall penalty.
- For this reason alone, we ensure all our clients are set up with the maximum amount of mortgage flexibility from day one of your mortgage. This helps protect your greatest asset so that you have the tools and resources to succeed given any changes that come along in life.
- Other typical costs may include bridge financing fees, moving costs, taxes, staging fees, & disbursement fees.
- If you’re using the equity in your home for the down payment on your next home, this may seem complicated at first glance. We will work with you to help calculate the total remaining equity in your home after all expenses are accounted for.
- We will then put a detailed plan in place to help you qualify and set you up in a mortgage product that offers you optimal flexibility with a payment you’re most comfortable with.
The minimum down payment on your next purchase is a very common question in today’s market so let’s break that down.
- The minimum down payment requirements are:
- 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.
- 20% will also be required when you:
- Purchase a rental property
- Take a 30-year amortization
- Refinance your mortgage
- Purchase over $1,000,000
- Utilize alternative financing options
- Examples of some down payment sources may include:
- Personal savings
- A gift from an immediate family member
- RRSP’s or TFSA’s
- Investment accounts
- Borrowed money in some cases
- With all our clients, our main goal is to save you as much money as possible whilst setting you up in a mortgage that helps you succeed.
- That means our first step is always to look at the portability of your current mortgage over to your new home. In some cases, this is a great option where your rate may be lower than market rates and we can set you up with your same lender. In other cases, there may be more competitive rates and mortgage solutions available to you.
- Because the market is always evolving, we make it our priority to maintain our close ties with our lending partners to ensure you’re seeing the maximum exposure to market rates, options, and available products.