Blog Post

Thinking of Selling? Costs You Should Know About!

Katherine Martin • February 14, 2018

Often times it’s the simple math that will betray you when selling a property. In your head you do quick calculations, you take what you think your property will sell for and then subtract what you owe on your mortgage, and the rest is your profit! Well… not so fast, there are several costs that have to be taken into consideration when selling a home. It’s especially important to get these costs right when you are selling one property, and using the proceeds from that sale as a downpayment for another property.

So here is a fairly comprehensive list of costs you may incur when selling your home.

Real Estate Transaction Costs

Although it may seem odd that you have to pay money to sell your home, that’s the reality, and selling a property isn’t cheap. If you use the services of a professional REALTOR®, the total commission cost is going to be anywhere between 4-6% of the purchase price, divided between the listing agent (the REALTOR® who represents you) and the buyer’s agent (the REALTOR® representing the buyer). It’s also good to note that GST is added to real estate commissions.

If you are looking for a way to get around paying real estate commissions, you might consider selling your house privately. To list your property with a FSBO company (for sale by owner), you are going to be anywhere between $400-$1500 just for setup and a bit of marketing. From there, you may still have to negotiate a commission if potential buyers are working with a buyer’s agent.

Mortgage Discharge Fees

If you have a mortgage on your property, there will be a cost to discharge it, the question is how much?

If you are breaking your mortgage in the middle of your term, you will be responsible to pay a penalty. On a closed mortgage, that penalty will be either 3 months interest or an Interest Rate Differential penalty, known as an IRD. Each mortgage contract is written up differently lender by lender, so it’s impossible to simply explain the math here and have you calculate your penalty on your own. In order to figure out your IRD ahead of time, you can either contact your lender directly, or you can contact me and I can help you through the process.

The IRD penalty is the wildcard in the whole process, because depending on how the lender calculates the penalty, penalties can range from $3,000 to $30,000. It is very important to know what you are dealing with here.

If you are currently in a variable rate mortgage, your penalty will be equal to 3 months interest. Even if you are in an open mortgage, or have a home equity line of credit secured to your property, there might not be a penalty to discharge, but there will most certainly be some kind of lender fee, usually between $250-$500.

Lawyer’s Fees

In order to discharge the title of your property, and to verify that the buyer is going to receive a clear title of your property, you are going to incur legal fees to sell your property. In a straightforward discharge, expect to pay between $500-$1000, less than when you purchased the property, but an expense none the less.

Utilities and Property Tax

Although this might not come as a surprise, when you are selling your property, you are responsible for paying all the property taxes and utilities up to the day you no longer have possession. If you close in the middle of the month, you will be responsible for half the months taxes and utilities. If you are on equalized payments, and you have run a deficit with the utility company, expect to bring that bill current before your lawyer can discharge the mortgage!

Capital Gains Tax

If you’re selling your primary residence, you are in the clear. In Canada we don’t pay tax on the appreciation of our primary residences, however, if you are selling an income property, you will be responsible to pay taxes on half the gains at your marginal income tax rate.

Property Repair

If you are looking to sell your house quickly, you will want to make sure that it is in tip top shape, don’t underestimate the growing costs of fixing your property up before trying to sell it. It has been said that sellers should consider spending up to .5%-1% of the asking price on getting the property ready, making sure the small things are looked after will give people the feeling like the property was looked after . Low-cost, minor improvements like

Patch drywall and nail holes, repaint.
Fix or replace damaged flooring.
Repair plumbing leaks.
Replace burnt out light bulbs.
Replace outdated light fixtures.
Clean out and reseal gutters.
Keep up with the yard and garden.

Moving

Don’t forget that once you do sell your house, it’s gonna cost you money (and time) to move. Depending on how much stuff you have, you are looking at some gas money and pizza for friends, or a few hundred to a few thousand for movers.

There you have it, by understanding these costs hopefully you will have a better idea of how much money you will actually have in your jeans after selling your house! And if you need a mortgage to buy a new one, contact me anytime!

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Mail

Katherine Martin

Origin Mortgages

Phone: 1-604-454-0843
Email: kmartin@planmymortgage.ca
Fax: 1-604-454-0842

Improving Your Credit Score

By Katherine Martin • February 19, 2025

Your credit score and how you manage credit are huge factors in qualifying for a mortgage. If you want the best interest rates and mortgage products available on the market, you want a high credit score. Here are a few things you can do to improve your credit score. Make all your payments on time. Making your payments on time is so important; in fact, it might just be the most important factor in managing your credit. Here's how credit works. When you borrow money from a lender, you agree to make payments with interest on a set schedule until the debt is repaid in full. Good credit is established and maintained by making your payments on time. However, If you break the terms of that schedule by not making your payments, the lender will report the missed payments to the credit reporting agencies, and your credit score suffers. It’s that simple. The more payments you miss, the lower your score will be. If you fail to make payments for over 120 days, the lender will most likely send your debt to be recovered by a collection agency. Collections stay on your report for a long time. So the moment you realize you have missed a payment or as soon as you have the money for it, make the payment. If something prevents you from making a payment, consider contacting the lender directly to let them know what happened and work out an arrangement to make the payment as soon as possible. It's good to note that lenders only report late payments after a payment is 30 days late. If you miss a payment on a Friday and catch it the following Monday, you won't have anything to worry about - except maybe an NSF fee. Now, just because payments don't report until being 30 days late, don’t get comfortable with making late payments; the best advice is to pay your debts on time, as agreed. Stop acquiring new credit. If you already have at least two different trade lines, you shouldn’t acquire new trade lines just for the sake of it. Of course, if you need to borrow money, like to purchase a vehicle to commute to work, go ahead and apply. Just remember: having more credit available to you doesn’t really help your credit score. In fact, each time a potential lender looks at your credit report, it may lower your credit score a little bit. With that said, if you already have two different trade lines and your lender offers you an increase on your limit, take it. A credit card with a $10k limit is better for you than a credit card with a $2k limit because how much you spend compared to your credit card's limit impacts your credit score. This leads us directly into the next point. Keep a reasonable balance. The more credit you use compared to the limit you have, the less creditworthy you appear. It’s better to carry a reasonable balance (15-25% of the card’s limit) and pay it off each month than to max out your credit cards and just make the minimum payments. If you have to spend more than 25% of your card limit, try to remain under 60%. That shows good utilization. Paying down your credit cards every month and carrying a zero balance will undoubtedly improve your credit score. Check your credit report regularly. Did you know that roughly 20% of credit reports have misinformation on them? Mistakes happen all the time. Lenders misreport information, or people with the same names get merged reports. Any number of things could be inaccurate without you knowing about it. You might even have become a victim of fraud or identity theft. By checking your credit regularly, you can stay on top of everything and correct any errors promptly. Both of Canada's credit reporting agencies, Equifax and Transunion, have programs that, for a small fee, will monitor and update you on any changes made to your credit report. Handle collections immediately. When checking your credit report for accuracy, if you happen to find a collection has been registered against you, deal with it immediately. It could be a closed-out cell phone account with a small balance owing, a final utility bill that got missed, unpaid parking tickets, wage garnishments, or spousal support payments. Regardless of what it is, it will harm your credit score if it's registered on your credit report. The best plan of action is to handle any collections or delinquent accounts as soon as possible. Use your credit card. If you have acquired credit cards to build your credit score, but you rarely use them, there is a chance the lender might not report your usage, and that won’t help your credit score. You'll want to make sure that you use your credit at least once every three months. Many people find success using their credit cards for gas and groceries and paying off the outstanding balance each month. There you have it. Regardless of what your credit looks like now, you will continue to increase your credit score if you follow the points outlined above. If you're looking to buy a property and you’d like to work through your credit report in detail, let’s put together a plan to get you qualified for a mortgage. Get in touch anytime; it would be a pleasure to work with you!

How To Establish New Credit

By Katherine Martin • February 12, 2025

If you’re new to managing personal finance and you want to learn about credit, you’ve come to the right place. Establishing new credit is a bit of a catch-22. To build a credit history, you need credit. But it’s hard to get credit without having a credit history. So, where do you start? Well, the first thing you should know is that building credit takes time. It’s not something that happens overnight. If you’re looking to secure mortgage financing, you will want to have a minimum of two trade lines (credit cards, loans, or lines of credit) with a minimum limit of $2500, reporting for at least two years. If you don’t have any credit yet, the best time to get started is right now. However, that may be difficult because, as we've already identified, without a credit history, most lenders won’t feel confident about taking a chance on you. What’s the solution? Consider a secured credit card. With a secured credit card, you make a deposit upfront that matches the amount you want to borrow. A reasonable amount would be $1000 deposited on a single secured credit card. You then use your secured credit card to make household purchases and regular utility payments, paying off the total balance each month. If you default on the money borrowed for whatever reason, the lender will retain the money you put up as collateral. When looking for a secured credit card, be sure to ask whether they report to the two nationwide credit bureaus, Equifax and TransUnion. If the credit card company doesn't report, the credit card account will be useless for your purposes; move on until you find a company that reports to both credit bureaus. Once your secured credit card begins reporting to the credit bureaus, you begin to have a credit score; usually, this takes about three months. Now you can start to seek out a second trade line in the form of an unsecured credit card. Don’t forget to ensure that this card reports to both of the credit reporting agencies. Another option at this point could be a car loan. From here, you simply want to make all your payments on time! But what happens if you’re looking to secure mortgage financing before you have a fully established credit report? Well, if you have someone who would consider co-signing, you can certainly go that route. The mortgage application will depend on their income and credit report, but your name will be on the mortgage. Hopefully, when the mortgage is up for renewal, you’ll have the established credit required to remove them from the mortgage and qualify on your own. Although establishing credit takes a minimum of two years, it really begins with putting together a plan. If you’d like to discuss anything credit or mortgage-related, please get in touch!