SOME ADDITIONAL EXPENSES WHEN PURCHASING A HOME
Buying a home can be a very emotional event… and it can be very stressful … and in the excitement of the process, it’s all too
easy to forget the additional costs involved in any transaction of buying a home. Keep in the mind that buying a home is one
of the largest financial investments you will probably make and planning and budgeting for it is essential. Talk with your agent
and find out about them, and budget for them in the home buying process.
A FEW ADDITIONAL COSTS YOU MAY INCUR TO INCLUDE IN YOUR BUDGET
House Inspection: This is an absolute must have, for both re-sale and newer homes. Ask your agent to insert that condition
in your offer. Home inspections usually take about 2 – 2 1/2 hours and the cost will range from $350.00 – $450.00 depending
on the size of the home, and whether the basement is finished. The cost will be lower if it is a condominium townhome.
Appraisal: When applying for your mortgage for your new home, most financial institutions require that an appraisal be done
to determine how much they are prepared to lend you. If this is not covered in the cost of the mortgage, it usually runs about
$200.00 – $250.00.
Mortgage Costs: Discuss the various payment options with your financial institution i.e. monthly, bi-monthly, weekly etc., to
determine which one suits your needs.. Also discuss types and terms of the mortgage. Types would open, closed, etc. and term
means how long these rates will apply, i.e. 6 month term, 2 year term or 5 year term. Amortization would indicate the total
length or amortization period of the mortgage, i.e. 20 year, 25 year, etc. It would be advisable to obtain a pre-approval from
your bank and lock in the interest rate while you shop for your home. This way, if the rates increase, you are locked in… If the
rates decrease, you can get the lower rate. These are normally valid for a period 90-120 days.
Insurance: If you are only putting 5% down on your mortgage, mortgage insurance is mandatory, and usually a requirement
with a 20% down payment, or less. It can include a minimal charge and would be slightly higher if you are self-employed
without benefit of third-party verification of income.
Title Insurance: Title insurance is a one time charge that you can ask your lawyer to include in your closing costs.
This will cover any unforeseen issues that you were not aware of that could appear after closing. Title Insurance
costs depend on the value or purchase price of the home, but an average cost is about $250 – $300 and is a one time
Survey: A survey document is an up to date document showing the exact property line, and all buildings, fences, etc.
located on the property. In many cases the Vendor will have one, and if your lawyer insists on having one, plan on
spending about $1,000 – $1,500. This would be beneficial if you are planning on making any changes to the property, i.e. installing a fence around the perimeter, installing a pool, etc.
Home Insurance: This can sometimes be overlooked when calculating your monthly costs. Get a few quotations
and make sure your enquire about any separate riders you may need for jewellery, furs, art, antiques, etc.
Condo Costs: Some condos fees include costs such as hydro, heat, roofs, parking, windows etc., but some do not.
These can be found in the Status Certificate, which your lawyer will review. He/she will look for any deficiencies in
the financial position of the condo corporation, ensure the insurance on the property is sufficient and in place, any
special assessments that may be coming up, and a review of the monthly condo costs.
Legal Costs and Disbursements: I would recommend you call at least 2 lawyers and ask what their fees are
for closing on both buying and selling… and be sure to ask for the cost of disbursements. Your lawyer will check the
title to the property to ensure it is free and clean of liens or encumbrances.
Land Transfer Tax: This tax is levied on every purchase and covers the cost of transferring the property from the
previous owner to the new owner. There are sometimes reductions offered by the Government for first time homes
buyers, or senior buyers. It usually calculates to be about 1% + – of the purchase price.
Repairs: The house inspection will usually reveal small repairs or items to make note of for future repairs. Sometimes
it is just a bit of paint, of replacing an electrical outlet.. or as large as replacing the roof, or furnace. Take note, or bring
a camera with you to record what repairs must be made, and also those repairs you would like to make in the future.
Your house inspector can offer an estimate on the cost of these repairs. Your home inspection will usually be in written
form and you will have a copy of any deficiencies the inspector noted in his report.
Replacements: Make room in your budget for replacement items, such as window treatments, new appliances, or
replacing the carpet with hardwood floors. Costs will vary, depending on the items you choose to replace, but once
again, get more than one quotation.
Moving: Try to avoid moving at the end of the month, as moving companies normally charge a higher rate…
June 30th is a date to avoid at all costs. Get at least 2 estimates, and if you are moving small items yourself,
make sure to include the cost of the small truck rental. Ask your Realtor to help with an approximation of the costs
involved so you can budget for them….. The last thing you want are unexpected costs that could sabotage your
purchase….. be prepared before you go shopping for that new home and know exactly what it will cost…
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