Buying a home is a big investment – likely the largest one you will ever make. The cost to buy a home should be carefully considered to avoid the risk of financial difficulty in the future.
Since this decision has a large impact on your wallet, we want to take some time to explore the many costs associated with buying a home. Doing your homework and knowing the average cost of these services in your neighbourhood will help you choose a home within a realistic price range.
Deposit: As part of the Agreement of Purchase and Sale, you are required to put a deposit down upon acceptance of the offer. Depending on your location and the price of a home, it could be anywhere from $1000 to $10,000. This deposit will become part of your down payment once you have removed conditions on the offer. If you do not remove conditions and walk away from the deal, the deposit is refundable (if it’s stated in the condition).
Down Payment: In Canada, the minimum amount you need to put down on a home is 5%. While this is realistic for most first time home buyers, having a down payment of 20% or more will help buyers avoid paying Mortgage Loan Insurance.
Land Transfer Tax: When you buy a home, you are required to pay a land transfer tax to the province upon closing. This tax is based on the sale price of the property. If you are a first time home buyer, and credit of up to $4000 could be available.
Home Inspection: A home inspection is a necessary step in your home buying process and will normally cost an average of $350 depending on the size, age, and condition of the home. This helps ensure there are no unexpected maintenance or home improvement costs upon purchasing the home.
Appraisal Fee: An appraisal will normally cost between $200 and $300 but can vary depending on your location if one is required. This will help prevent you from borrowing more than you need to, and will prevent lenders from giving you too much. Consult with your mortgage agent on the appraisal process if one is required.
Mortgage Insurance: There is mortgage life insurance, which is designed to protect the repayment of a mortgage if anything were to happen to you. There is also mortgage loan insurance if your down payment is less than 20% of the total house cost. Premiums for this type of insurance range from 0.65% to 4% and increase if you are self employed.
Property Insurance: While property insurance is likely already something you have factored into your budget, it’s important to do your research and find a reasonable quote that will ensure you are covered should anything unexpected happen.
Lawyer Fees: The fee you will be charged by your lawyer will vary depending on the person representing you and must be paid upon closing. Ask your real estate agent for advice as they likely have a preferred trusted lawyer they can refer you to.
Title Insurance: Title insurance is a one-time-fee that provides protection from losses related to the properties title or ownership.
Property Taxes: The cost of property taxes is determined by the MPAC assessed value of the home, multiplied by the municipal tax rate. Rates vary by municipality, and there could be local improvement charges if any added services or upgrades have been completed recently.
Maintenance and Utility Costs: Potentially your largest ongoing homeowner expense, these costs include gas service, electric service, water/waste charges, lawn care/ yard work, professional services, additions/upgrades and the cost of keeping the house running year-round.
Moving Expenses: It’s easy to forget about the small things when moving, but it’s important to remember they can add up quickly! Consider the cost for phone, electricity, and other utility installations and don’t forget about movers, a moving truck and feeding your friends who are helping out!
Now that you have a better idea of the cost to buy a home, it’s time to hit the books to find out how much these services will cost in your area. Make a list, create a budget, and give me a call/text to get started! (519)791-9545