Costs of Buying a Home
Buying your first home for the first time is very exciting, whether it be an apartment, condo, townhouse or house. It could come at wildly different stages for people. For some, they want to buy a house as their first major purchase, as early as possible. For some, they want to travel and live freely before starting the search of home ownership. For others, they want to take it in stages, first renting, then purchasing a car loan, then buying a puppy/kitty and then hearing up for the big purchase of a home.
In our blog last week we talked about the some tips and tricks to know about when buying into the real estate market for the first time. Today, we are going to talk about what the costs of buying a home and what you can expect when going into the purchase of a real estate property. We are going to break down each cost and what you could expect. Often times you will likely hear your friends, coworkers or others talk about how closing their purchase was difficult because of all the addition expenses they were not expecting. Well, we want you to be prepared.
Here is the breakdown of the Costs of Buying a Home:
Property Appraisal Fees
This fee determines what the property’s market value is and is often a requirement to getting a mortgage loan. An appraisal takes in account the quality of the construction, home features, defects, location and current the current housing market.
This fee could vary likely from $350-800.
Building Inspection Costs
It is important to not just just into a purchase before understanding exactly what you are getting into. For this reason, it’s strongly recommended that you include an inspection as a condition of your offer to purchase. This will help you understand any defects that come with the house, including water leaks, the presence of asbestos, and what renovations and repairs may be needed in the future.
It is best to not cheap out on this part and hire a certified inspector. Make sure they are a member of an association or professional order so that in case of malpractice, you will have legal recourse. It is worth the cost although you can expect $500 or more.
Using a legal professional is mandatory. These legal experts prepare and supervise the signature of a number of important documents (such as the deed), and are also responsible for title search and registration.
Mortgage Loan Insurance Premium
If you put down less than 20% you will have to pay a mortgage insurance premium. It is mandatory under 20%, and in Ontario, Quebec and Saskatchewan the provincial sales tax is added to the premium and must be paid when you purchase the home.
Sales Tax on New Properties
It varies province to province on how much tax you must pay on the property, and can be as low as 5% on Alberta or 15% in New Brunswick.
Additional foreign buyers taxes apply in some regions.
Welcome Tax or Land Transfer Tax
This tax is very much dependent on the region you purchase in and is a significant source of revenue for municipalities and provinces.
Pro Tip: In some provinces, such as Ontario and British Columbia, a First Time Homebuyer may be eligible to have this tax refunded.
Are there parts of the house you want to renovate or might need to renovate? Remember to keep these costs into perspective of your total cost to understand where your budget may stand and what renovations can be done instantly and which ones may have to wait.
A typically bathroom renovation averages from $10,000 – $15,000 and a kitchen $25,000 – $75000.
It is important to note that renovations can increase your homes value on top of making it a home you prefer to live in. We recommend living in the home for a few months before deciding exactly what you want to renovate.
Moving costs are likely imminent depending on your situations.
Renting a truck usually costs a few hundred dollars and hiring movers can be $50 – $200 an hour.
Consider decorating and furnishing costs into your budget.
Do not forget about annual fees such as:
- Heating, electricity and has
- Internet, cable and telephone
- Home Insurance
- Strata fees (if applicable)
- Property Taxes
- School Taxes
We understand these costs of buying a home are a lot to take in, but it is essential to remember that owning a property/home is an investment into your future. We wanted to lay put all of these costs of buying a home in a convenient blog so that you can understand what to expect. We are always available to chat and would love to help you on your journey!