Buying a house? Why you need to know the expected costs
We usually encounter several concerns when buying a home. Many assume that once you have chosen your property, you’re all good to go. That’s seldom the case; the hard part comes after you’ve set your sights on the home of your dreams or your investment property of choice.
The more challenging part comes when you’re faced with the costs of buying a house. It can be a bit overwhelming, but by clearly mapping it out and with the guidance of an experienced, reliable mortgage broker, you can go through this process without incurring unnecessary stress.
Is it possible to buy a house without properly anticipating upfront costs?
The answer would be a hard no. There are expected costs when buying a house or property. These are upfront costs that need to be settled prior to engaging in further home buying or property investing activities.
One of the most important expected costs is down payment. If you can’t afford the necessary down payment, then it may not be possible to acquire your desired property.
There are also taxes and insurance that you’ll need to pay as part of the process. Neglecting them would be a huge no-no, as these belong to the list of expected costs when buying a home or investing in a property.
What are the costs that come with buying a property?
These expenses need to be settled immediately because they’re considered to be instrumental in processing the purchase of your property.
This is the amount of money that the lender will require you to put down towards the purchase of your property. Some lenders require a minimum of 5 to 20 percent of the purchase price. However, if the purchase price is more than $1,000,000 a larger down payment is required.
Another expected cost of buying a house is the appraisal fee, which is typically around $300 to $500. This represents a licensed appraiser’s opinion of the market value of your desired property.
You need to hire a home inspector to see if the house you plan to buy is in good condition. A 2000 sq. ft. house usually takes about 2 to 3 hours to inspect and costs between $400 to $500.
Taxes and Insurances
Taxes and insurance are a fraction of the price of the property you purchase and are computed accordingly.
Land Transfer Tax
Surprisingly, this is a tax that is often overlooked. However, you must list this right away under expected costs of buying your house or property investment, since this is the tax you have to shoulder for you to acquire the title and thereafter, have it transferred to your name, for legitimate or legal transfer of ownership. Each Canadian province mandates its own transfer tax rate.
This is a government tax on your real estate property and is computed by multiplying the assessed value of the property to the tax rate of the Canadian city or province where the property is located.
Along with property tax, is property insurance, which is another cost that you should expect when buying property. On average, Canadians pay more than $800 annually for home insurance, but this number drastically varies per location.
Mortgage Default Insurance
Mortgage default insurance protects lenders in the event of a borrower failing to make payments or defaulting their mortgage loan. If your down payment is less than 20 percent of the purchase price, you’re likely to require mortgage insurance.
Mortgage Life Insurance
Mortgage life insurance helps to protect your family with coverage that pays off the mortgage in the event the borrower(s) passes away.
Title Insurance essentially protects your ownership against any losses you might incur because of undetected or unknown types of defects. The cost can range from $200 to $400 or more.
Costs Prior to Moving In
These pertain to fees that cover legal documents and disbursements in relation to the property and costs that can vary from $1,500 and up.
Maintenance and Energy Costs
This is one of the most expensive costs that you should expect to incur, as you move into your new home or when you are sprucing up that investment property of yours. This involves air conditioning, lawn maintenance, utilities and other work needed on your property.
These are spent on movers, phone and electrical lines, as well as cable and internet to fully power a modern home.
After learning the expected costs of buying a house, enjoy what lies ahead!
Now that you know the expected costs of buying a house, you can better prepare yourself. One of the best ways to prepare is to seek professional advice from our reliable and hardworking mortgage broker who can assist you every step of the way.
Our services range from assistance in home purchase, mortgage renewals and refinancing, estate planning, insurance and investments.