Buying

What You Should Know Before Buying a Home in PEI

What You Should Know Before Buying a Home in PEI

PEI is mostly rural with a couple of urban areas and the most commonly bought or sold property here is the single family home.  While duplexes and townhouses are available in Charlottetown and Summerside, the single family home still dominates the market.  Homes in PEI sell well below the national average coming in with an average selling price at $178,000 making PEI very affordable.  Here is what you should know before buying a home in PEI.

The Money

Before you start house hunting you should have a meeting with your bank to make sure you have the adequate funds for the down payment as well as the monthly mortgage payments.  You can get pre-approved for a mortgage so you know what kind of budget that you have to work with.  With pre-approval you can meet with a realtor who can help you find the right house for you.

Before you start making offers here are some things you should know about how real estate works in PEI:

  • The minimum down payment for a house on the island is at least 5%
  • Unless this is your first time buying a home you will also have to pay a 1% Real Property Transfer Tax
  • There are other fees associated with buying your home like inspection fees, closing costs and mortgage insurance
  • Getting a home inspection done is a MUST! There are plenty of home inspectors and you can find one with a simple Google search.  They will find any potential problems like cracked foundations or wiring issues.
  • Many homes in PEI use well water, if the property you’re looking at has a well then you will need to have the water tested at your expense.
  • A qualified lawyer able to practice in PEI is necessary to complete the paperwork necessary in selling a house.
  • Property taxes are an annual expense, if you have a mortgage they will be rolled into the monthly payments. If not, it will be your responsibility to pay them.  The tax rate will depend on the value and where your property is located, this should be disclosed to you at the time of purchase.

Finding Your Dream Home

There are plenty of resources to help you find your dream home.  You can start by working with one of our local realtors who knows the area well.  You can also check the PEI Real Estate Guide that is published weekly on Thursdays, it will also list the upcoming open houses for the weekend.  You can also check Kijiji and Craigslist for more listings.

The Real Cost of Buying a Home in PEI

The Real Cost of Buying a Home in PEI

Buying a home is one of the bigger milestones in your adult life.  It is a scary process that needs to be handled with care but when all is said and done you have a home that you can proudly call your own.  It takes a team of people to make sure that the process goes smoothly, from realtors to attorneys.  PEI is a great place to set down roots and call home.  Before you start house hunting you should be aware of the real cost of buying a home in PEI.

There are a variety of fees and taxes that go with any real estate transaction in the province,  let’s take a look at them so you don’t buy your house unprepared for the money you will need to close the deal.

Legal Costs

The legal costs of the transaction can vary and this is something you will need to talk about with a local attorney.  They will sit down and explain their fees along with the actions they take on your behalf, that can include things like search fees, admin fees and the cost of filing paperwork.  Most of them time an attorney will charge a flat fee for their services.

Deed and Mortgage Registration

Both your deed and mortgage need to be registered when you buy a new house.  Both of these costs are paid to the province and they are based on the price of the property.  If you pay cash for your home then you don’t need to register the mortgage.

Taxes

Anyone buying property in PEI is subject to property transfer taxes however there are some exceptions.  Typically the tax rate is 1% of the purchase price or the assessed value, you will pay at the higher value.  As far as exemptions go, here are some situations where you won’t have to pay.

  1. First time homebuyers can be exempted under certain circumstances. They must have lived in the province for at least six months prior to buying their home.  They also must not have previously owned property in another province they must be a genuine first time buyer.  They also need to continue to live in PEI for six months after the closing of the transaction.  The tax must be paid at the time of purchase but you can apply to have it refunded to you.
  2. Transactions between family members can also be exempted as well. This is when one family member effectively gifts a house to another or sells the home at a $1 price tag.
  3. Low cost transfers where the property is valued at and sold at less than $30,000.

Other Costs

There may be other costs that are associated with buying a home, these are things like the cost of inspection and what it will cost to connect utilities and any repair costs the home may need.