The 12 Hidden Costs Of Buying A Home

Balancing a budget is key. Here are a few things that surprise buyers and should be added to the overall budget as you plan for your purchase:

1. Mortgage Loan Insurance

If you are putting less than 20 per cent of the house value down, you’ll need mortgage loan insurance. Depending on your lender, the premium can be added to mortgage payments. Usually, mortgage loan insurance premiums range between 0.5% and 2.75% of the principal plus applicable fees.

2. Appraisal Fee

Lenders typically loan a percentage of the home’s purchase price or the market appraisal of the property. Cost depends on the size and complexity of the assignment.

3. Land Survey

The lender may ask for a current survey or certificate of location before signing off on the loan. There can be a substantial cost for having a new survey done on the property.  

4. Deposit

A deposit normally goes with the formal offer to purchase so you want to plan ahead so you have this ready.

5. Property Insurance

If you have a mortgage, your lender will insist that you have enough home insurance to cover the total value of the property. Your lawyer will need confirmation that insurance has been arranged. Should your house be completely destroyed, the insurance company is required to pay the lender first. In this scenario, you would still own the lot but would have to negotiate with a lender to borrow to rebuild. Home insurance is priced based on the value of your home and current reconstruction costs

6. Title Insurance

Title insurance is optional and covers problems that may arise due to encroachment issues, existing liens against the property’s title, title fraud, undischarged mortgages and other issues relating to the property’s previous owners. The cost is relatively low, usually a few hundred dollars.

7. Legal Fees

You can save some of the legal fees usually charged by the lender if your lawyer draws up the mortgage. You’ll also pay for disbursements which are the costs involved in drawing up the title deed, conducting a title search, and preparing and registering the mortgage. Make sure your interests are protected by discussing your Offer of Purchase and Sale with your lawyer or notary prior to signing.

8. Land Transfer Tax

This is charged whenever a property changes hands and is based on the purchase price. In some cases, first time homebuyers may be exempt from a portion of this cost. You can obtain further details about land transfer tax on provincial or municipal websites to help you estimate the cost or contact me and I can walk you through what you need to know.

9. Goods and Services Tax

Resale (used) homes are exempt from GST but it does apply to newly constructed homes and may qualify for a partial rebate. The rebate is typically dependent on the sales price and if the home is going to be your primary place of residence.

10. Home Inspection Fee

An inspection protects the buyer by revealing any problems in the property that you’d want to know before you move in. The home inspector evaluates the structures and systems that make up your home and provides you with a written report. While not mandatory, many people make a professional home inspection a condition of their Offer of Purchase and Sale.

11. Property Survey

Sometimes requested by the lender, a survey is done to verify the property’s boundaries, measurements and structures and identify any easements, rights of way or encroachments on your, or adjacent . If the seller does not have one or does not agree to get one, you will have to pay for it yourself.

12. Mortgage Broker’s Fee

If you use a mortgage broker, a fee may be charged to arrange a mortgage on your behalf.

Finally, you want to include general expenses such as moving costs, fees charged by utilities for service hook-ups, property tax and other adjustments and ongoing maintenance (condo fees, etc.), and utility costs.

Getting ready to buy? I’d love to help you find the right for you home and figure out the right budget.