Many first-time homebuyers are unaware of the hidden costs associated with buying a home. As a result, they are ill-prepared and often taken by surprise when the final closing date comes. If you are looking to buy your first home, you should understand that you’ll have to pay for a lot more than just your down payment. By understanding the full costs associated with home ownership ahead of time, you’ll be able to save accordingly and make the process much less stressful.
Here are the most common unexpected expenses that come with buying a home:
- Home inspection and appraisal fees: When buying a home, you usually need to have it inspected and appraised to make sure that you are not buying a rundown property or paying more than you should. You may also have to have the home inspected for mould and other things. As the buyer, you will be required to bear the cost of these, which could be several hundred dollars.
- Legal fees: This is one of the most expensive costs you’ll encounter when closing on your first home. Your lawyer will facilitate the transaction between you, the bank and the seller on your closing date. You can expect to pay a lawyer approximately $1500 to $2000 for these services.
- Property taxes: Once you become a homeowner, you will be required to pay property taxes. Hopefully you will have added property taxes to your monthly budget, but keep in mind that you may have to pay the remaining balance for the entire year upon closing, which could be quite a large lump sum. The taxes calculated are based on the current use and value of the land. The breakdown and amount of the taxes you will have to pay depends on your province’s regulations.
- Home insurance: When buying your first home with a mortgage, or any other home for that matter, your lender will require you to purchase home insurance before closing on the loan. Don’t forget to budget for this cost monthly or annually, depending on your payment schedule.
- Moving costs: If you are moving all your possessions from your current residence to your new house, then you may have to hire a moving company. The cost of moving depends on the total weight of the goods and the distance to be moved. Moving costs can be quite high and you should be prepared for these costs well in advance of your move.
- Repair and maintenance: Maintenance is part and parcel of living in a house, and once you move into your first home, you cannot escape it. Even if you do most of the cleaning and minor repairs yourself, you may still have to hire a contractor to do some or the more serious fixes, like plumbing repairs and HVAC system maintenance. If anything was discovered during your home inspection that should be addressed, make sure you budget for those replacements or repairs, too.
- Utility bills: If you’ve lived in a rental apartment in the past, you should be prepared for increased utility bills after buying your first home. The costs of water, electricity and gas are usually higher in a home than an apartment because of its larger size.
Buying your first home is an exciting time in your life. Make sure you are adequately prepared for the costs of purchasing a home by making a budget for your household expenses well in advance. If you need help with your budget, contact our credit counsellors today for a free consultation.