Hidden costs when buying a home is always something to think about and have top of mind. You always want to be sure you and your Real Estate team know every detail and that includes any hidden or fees associated with buying a house. Your realtor and lawyer can review a list of incremental costs that you should be budgeting for, and all of these should be considered when reviewing your pre-approval with your mortgage agent.
Hidden Cost #1: Home Inspections & Appraisals
The value of any property is usually determined by appraisals and surveys. The exact fees vary, but there are a number of items that you should take into consideration, as the cost usually falls to the buyer to cover.
A home inspection is typically always included with any offer on a house. The home inspector will evaluate the property and provide a written report of their findings, top to bottom. This home inspection report is a check for structural integrity and any potential hidden problems with the property. Home inspections are extremely important and can save you from problems down the road.
A home appraisal is required by mortgage lenders before they can approve a loan, and it gives an idea of the value of the property. The sale price may or may not reflect this figure, but lenders will use it to serve as collateral for the loan. Factors such as square footage, number of rooms, age and location are used to determine the value of the home you are hoping to buy.
Hidden Cost #2: Taxes & Legal Fees
Taxes and legal services are both necessary when buying a home, and it’s important to consider these costs and what to look out for.
Land Transfer Tax (Variable) varies by province and city, and it is usually calculated in accordance with the purchase price of your home. Most provinces will charge a tax whenever a property changes hands, and additional municipal taxes may also apply within certain cities.
When purchasing property, you will require a lawyer and notary services to ensure everything is above board. When asking for a quote from a lawyer, be sure that their price is inclusive of additional expenses, rather than just legal fees. Lawyer and notary fees invariably differ from purchase to purchase but are often reflective of the sale price.
Hidden Cost #3: Insurance Policies
Once you receive the keys to your new home or condo, it’s time to celebrate! It’s also time to think about protecting your purchase. You never know what the future holds, but the right insurance helps you be sure that yours is secure.
Home Insurance is something every homeowner must have. Basic home insurance protects your home and its contents. It’s worth doing some research and finding out exactly what is covered, but generally theft, fire, flooding and severe weather come as standard. It’s also a good idea to get several quotes and compare policies to see what works for you and your family.
Title Insurance is an optional insurance that offers peace of mind and can protect you from a number of potential issues, such as title fraud, encroachment issues, and unresolved problems left by the previous owner. This one-time payment differs in price depending on location and purchase value.
High-Ratio Mortgage Insurance is something all buyers with a less than 20% deposit are required to take out. The one-time payment generally costs between 0.5% and 4.5% of your mortgage value and can be paid upfront or added to your mortgage payments.
Mortgage Life Insurance is not required but something to think about at this stage. It’s a useful policy to take out if you have a family. In the event of your, or your spouse’s premature death, all or a part of your mortgage will be paid off.
Hidden Costs #4: Misc Fees When Buying a House
There are plenty of other little details to take into consideration when you budget for your home and the entire buying process. Here are a few other miscellaneous costs that should be on your radar:
Any property type: as a new homeowner, it’s your responsibility to reimburse the seller for any prepaid property taxes or utility bills.
In a condo, you’ll be required to pay condo fees, which are a monthly fee that goes towards the upkeep and maintenance of the communal areas.
- Moving Costs
- Redecorating & Furnishings
- Utilities
- Parking Permits
- Garbage Collection
All of these details can seem overwhelming, but they’re worth keeping on your radar. Taking care of them in advance of your purchase will ensure a seamless and stress-free process.