So you have your 5% down and you are ready to start looking for a home.
If only it was that simple.
Let’s use $300,000 as the cost of the hypothetical house you are going to buy — which is the average cost of a home in Winnipeg. If you move just outside the city you can get a lot more for your dollar, but that’s for another post.
So, say you find a home and you have your $15,000 down payment. You would think that your mortgage would go down to $285,000, right?
With 5% down on a $300,000 home your mortgage only goes down to $296, 400.
Umm only $3,600? Where did my other $11,400 go?
That’s your mortgage insurance that you need to pay unless you have 20% down.
Ok, so whatever, I have to make a few extra payments. I can live with that.
Did you know you need a lawyer to do your paperwork and do lawyer things so you can own your home?
That costs about $1,000.
Land transfer tax
Then your lawyer is going to tell you that you need to pay a land transfer tax, which is about $3,720 for a $300,000 home in Winnipeg.
Already you are at:
And you only have taken $3,600 off of your mortgage, and you have no furniture, or kitchen utensils and you have to use cardboard boxes as your plate, chair, table and bed.
(We are assuming a 5-year fixed mortgage rate with a 25-year amortization period here. If you don’t know what that means then I will cover it in the next few blog posts — stay tuned!)
And you think this sucks? There are costs to owning a home that you don’t even realize are a thing.
These costs vary depending on the area of live in, what temperature you like your home, how efficient your windows and heating system are, and how much water you use etc..
But be prepared to pay house insurance (different than mortgage insurance), property taxes, hydro and water bills. Along with your normal grocery bills, cell phone bill, car insurance, Netflix, and whatever other bills you pay.
There is an incredible site called ratehub where you can type in the asking price of a home and select your bank, down payment, amortization period and all that stuff and it will tell you how much your mortgage will be, your land transfer tax, your mortgage payments and all that fun stuff. I highly suggest you check it out if you are thinking about buying a home.
Don’t let all of this scare you. Buying a home is a great investment for your future, but it’s a big commitment. When you are ready, call someone you trust to help walk you through it.