First time home buyers are often totally in the dark as to the costs involved in buying a home. How much can they afford? How much will the mortgage payment be? How much will the down payment be? How much "extra" money should they have at closing time?
Let's take a hypothetical case where they buyers' have found a house and made an accepted offer of $100,000. With 5% down, the down payment would of course be $5000. In order to qualify for a mortgage of $95,000 and an interest rate of 5.5%, the buyer would have to have an income of at least $30,000 by most standards.
The monthly mortgage payment would be $579.87 and the land transfer tax would be $750.00. CMHC mortgages have a premium. The mortgage insurance premium would be $3,562.50 but this is usually not paid up front, but is normally added to the mortgage principle. Legal fees, home inspection and title insurance will add another $2100. Rounding it up to $2500 is a good idea to talk care of the inevitable extras.