Some Additional Costs of Buying a Home
There are considerable financial benefits associated with owning a home. Real estate generally will appreciate in value over time, and your affordable monthly mortgage payments provide you with the opportunity to purchase your investment with ease over time. Further, upon paying your mortgage off in full, you will own your home free and clear without the burden of a mortgage or rent payment in your budget each month. While there are financial benefits associated with owning a home, there may be more costs associated with your real estate purchase than you may be budgeting for. Most new home buyers will budget for a down payment and closing costs, but there are other costs to consider. The last thing you want to do is to purchase a home and be surprised by hidden costs and expenses. Before you buy your home, consider some of these additional costs.
When you buy a home, you inevitably will be required to sign many legally binding documents. While some people will sign these documents without legal advice, many do seek the assistance of a real estate lawyer. A real estate lawyer can review the documents to ensure your rights are protected. He or she can verify that all of the documents are in order, and the lawyer can answer your questions about the documents. It is common for a lawyer to charge as much as $1,000 for this service.
Mortgage insurance is a requirement in Canada for a mortgage with greater than 80 percent loan-to-value. This means that unless you have a down payment equivalent to approximately 20 percent of the sales price, you will be required to purchase mortgage insurance. The cost of the mortgage insurance will vary based on the amount of your mortgage down payment and amortization period. However, mortgage insurance can easily result in several thousand dollars of additional fees due at closing. However, you will have the option of paying the fee through your monthly mortgage payments over time.
Land Transfer Taxes
In every Canadian province, home buyers are required to pay a one-time land transfer tax after purchasing their property. The tax rate you pay will vary based on the province you live in and the value of the house. It is common for this rate to vary between a half percent and two percent of the property value. Some municipalities, such as Toronto, charge a secondary municipal land transfer tax in addition to the province’s tax. In addition to these one-time property taxes that are due after purchase, homeowners are obligated to pay a monthly bill for property tax as well.
After you have taken ownership of your home, you must then pay expenses related to relocating to your new home. These expenses may include everything from purchasing boxes and other moving supplies to renting a moving truck or hiring the services of a professional moving company. You may consider additional expenses that you may incur during this period of time as well, such as the need to stay in temporary housing, to pay for a self-storage unit for a few weeks while you are in the process of relocating, to pay for kennel fees for your pets on moving day and more.
Connection Fees for New Services
A home is often serviced by a number of utilities and communications companies. These may include a water and sewer company, a trash collection company, an electricity company, a gas company, a cable service provider and more. Most of these companies will charge you various fees to establish new service. For example, you may have to pay an installation fee to the cable company or phone company. You may have to pay a deposit for electricity or water service. Others will charge you a new account fee. When all of these fees are combined, they can easily equate to several hundred dollars up to $1,000 or more.
Outfitting Your Home
Whether you are moving into your first house from an apartment or you are relocating from a previous home you owned to a new home, you inevitably will need to pay for various expenses to outfit your new home. You may need to buy decorating items like new blinds and paint, or you may need new lawn maintenance equipment like a lawnmower. In many cases, the floor plan of your previous home is not the same as the floor plan of your new home. Because of this, there may be a need to purchase additional furniture.
As you can see, there are more costs associated with buying a new home and getting established in your new home than you may have initially planned for. As you budget and plan for your upcoming purchase, consider each of these expense areas in detail.