Many homebuyers tend to forget about all those “other” costs associated with purchasing a home. It can put people in a tough situation when they start to realize that costs can creep up REAL quick. The best thing any homebuyer can do, is educate themselves on what is really included in the entire process. My advice... speak with a realtor you trust so you make informed decisions.
Instead of having you frantically search Google, I’ve put together a fairly comprehensive list of what you can expect when you're signing on the dotted line. Now, some of these might not apply, but it’s good to be aware of them.
1. Appraisal - ($200-$300): this is the fee of having someone determine the value of a home for mortgage purposes.
2. Home Inspection - ($250-$600): a home inspector will evaluate the structure and its systems - providing you with an overview of the home’s condition. While it’s not a necessity, many buyers make it a condition of their offer. It's a small investment that let's you know exactly what to expect.
3. Insurance Costs for High-Ratio Mortgages - (0.50%-2.75%): this typically applies to first-time homebuyers. If your down payment is less than 20% of the purchase price, you have to pay a premium to CMHC. Unsure about what to put down? Our last edition (link) tackled this topic!
4. Land Transfer Tax (varied): this sneaky fee can be a big shock to many homebuyers, especially in Toronto since there is both the Ontario and Toronto Municipal transfer tax. For example, if you buy a home for $400,000 - you’ll pay $4,475 for the OLTT and $3,725 in TMLTT. Here’s a great calculator from TREB to help you ballpark.
5. Legal Fees ($800-$2,500): legal fees can vary, but the best thing you can do is get a quote that includes all related expenses and disbursements. Just don't leave this to the last minute.
6. Title Insurance (varied): this is optional, but it covers problems that arise due to survey irregularities, power of sale issues and other issues from the previous owner. For example, any home under $500,000, you can expect to pay $325.
7. Adjustments - ($400-$900): you will be required to reimburse the seller for any prepaid property tax, utilities or maintenance costs. It's not a big expense, but it still adds to the final bill.
8. Moving Costs - ($1,500-$5,000): this would cover any professional mover, packing materials or truck rental. Depending on whether you want to strap on the back brace and do some yourself, it can be a fairly big expense so leave some room in your budget.
9. Home Insurance - ($1,000-$2,000/yr): this will protect your home and its contents - a smart investment for anyone!
10. Miscellaneous Costs - ($500-$2,000): this is a good buffer to have for those “just incase” costs that every homebuyer will experience. Because believe me, there will be some that pop up!
11. The Must Have Upgrades - ($500-$2,500) This would be for upgrades and repairs. Most people will want to at least paint and make some minor repairs or upgrades but there is also a very good chance that major repairs or upgrades will need to take place before moving in or shortly afterwards. These types of things can run as much as you want or can spend but its always good to over budget by at least 10% and add at least a couple more weeks into your planning time.
Buying a home is a big investment and a big step in your life. Having unforeseen or unplanned costs surface can be a surefire way to make the entire experience one to forget.
Plan ahead and get advice from your lawyer and realtor on how to prepare for these costs. Knowing what you’re taking on is the key to a financially sound decision and a great start to home ownership.
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