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Jun 26, 2018
Investment doesn’t come without a cost. And a house is the most significant investment you will ever make. Most first-time home buyers are unaware that the real cost of buying a home is more than just the listing price.
That’s right, buying a house is more expensive than you think. There are upfront costs and continued costs you must consider in your budget.
Here we give you a list of costs that might arise during the purchasing journey, and afterward.
It’s better to start saving as soon as you can. Once you decide on a property, you will be asked to put down a large chunk of money called a down payment. This is the first payment of many that will go towards acquiring equity. Usually, this is 20% of the price leaving the rest covered by a mortgage loan.
If you were wise and saved, this is an appropriate time to reduce your debt. A larger down payment means less debt to pay. But if you have less than the required down payment, your lender might protect himself from risk and add a premium to your mortgage.
A mortgage is a loan, and just like any loan, it must be repaid. The amount you pay back monthly to your lender depends on the property’s price, your credit score, and type of mortgage rate that you choose.
Your mortgage rate is calculated by your interest rates. Every month next to your mortgage you also have to pay interest rates to your lender. A fixed rate keeps your monthly payments steady, while a variable rate considers whether interest rates go up or down.
This type of insurance will be new for you if you are a first-time home buyer. Title insurance is protection for your ownership, but it comes at an extra cost.
Knowing your property before you buy is key in making an informed decision.
A home inspection can uncover unexpected issues that to repair. The cost of the property will increase if unsolved problems appear after closing. When the property has more issues than you can handle, it is advised to move on.
An appraisal calculates the property’s value and helps your lender decide how much mortgage to give you. The cost for appraisals starts around $350.
Your lender might ask you for a property survey before getting your mortgage. The report inspects the property’s value based on its boundaries.
Purchasing a home is like buying any good, meaning that it comes with applicable taxes. The provincial government charges the land-transfer tax (LLT) based on your home price. If you live in Ontario, B.C. and P.E.I. consider yourself lucky because you might be able to rebate the tax as a first-time home buyer. GST or HST might also apply if you are buying a home that is new.
Lawyers tend to handle all the paperwork, ask for reports on your behalf, walk you through the purchase process and will ask for fees and disbursements once the closing is done.
Home insurance protects your home from any damage and your monthly insurance payments (called premiums) ensure that safeguard stays intact. Different policies have different prices. Invest beforehand if of past property claims and how the region is affected by natural disasters to find the perfect policy for you.
Property taxes are municipalities’ source of income to pay for services like garbage and recycling collection, road maintenance, snow removal, street lights and more. Your property taxes depend on where your property is located and are typically billed each year.
Your home might need a little push to start working smoothly. Repairs, upgrades, and changes (lighting, painting, locks re-keyed, etc.) are part of starting your home. Some utilities might also charge an activation fee.
Maintenance of your home will likely continue. Utilities will be monthly and maybe, a new kitchen or bathroom will be on your mind down the road.
Looking at these costs be discouraging, but staying on budget and buying your dream home is possible. Start your search, save your listings and compare which one would be the best for you.
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