Did You Budget For Extra Costs?
Buying a home can be a very emotional event. It can be very stressful … and all too easy to forget the additional costs involved in buying a home. Keep in the mind that buying a home is one of the largest financial investments you will probably make. Planning and budgeting for it is essential. Talk with your agent and find out about them, and budget for them in the home buying process.
Here are just a few of the costs involved you need to know about, so you can budget for them.
This is an absolute must have, for both re-sale and newer homes. Ask your agent to insert that condition in your offer. Home inspections usually take about 2 – 2 1/2 hours and the cost will range from $375.00 – $450.00 depending on the size of the home, and whether the basement is finished. Ask your agent for the name of a few inspectors, or you can find one of your choice.
When applying for your mortgage for your new home, most financial institutions require that an appraisal be done to determine how much they are prepared to lend you. If this is not covered in the cost of the mortgage, it usually runs about $200.00 – $250.00.
Discuss the various payment options with your financial institution i.e. monthly, bi-monthly, weekly etc., to determine which one suits your needs.. Also discuss types and terms of the mortgage. Types would open, closed, etc. and term means how long these rates will apply, i.e. 6 month term, 2 year term or 5 year term. Amortization would indicate the total length or amortization period of the mortgage, i.e. 20 year, 25 year, etc. It would be advisable to obtain a pre-approval from your bank and lock in the interest rate while you shop for your home. If the rates decrease, you can get the lower rate. These are normally valid for a period 90-120 days.
If you are only putting 5% down on your mortgage, mortgage insurance is mandatory, and usually a requirement with a 20% down payment, or less. It can include a minimal charge and would be slightly higher if you are self-employed without benefit of third-party verification of income.
Title insurance is a one time charge that you can ask your lawyer to include in your closing costs. This will cover any unforeseen issues that you were not aware of that could appear after closing. Title Insurance costs depend on the value or purchase price of the home, but an average cost is about $250 – $300 and is a one time charge.
A survey document is an up to date document showing the exact property line, and all buildings, fences, etc. located on the property. In many cases the Vendor will have one, and if your lawyer insists on having one, plan on spending about $1,000 – $1,500. This would be beneficial if you are planning on making any changes to the property, i.e. installing a fence around the perimeter, installing a pool, etc.
Get a few quotations and make sure your enquire about any separate riders you may need for jewellery, furs, art, antiques, etc.
Condo Maintenance Fees/Costs
Some condos fees include costs such as hydro, heat, roofs, parking, windows etc., but some do not. These can be found in the Status Certificate, which your lawyer will review. He/she will look for any deficiencies in the financial position of the condo corporation. He/she will also check to ensure the insurance on the property is sufficient and current. They will also check for any special assessments and a review of the monthly condo costs.
Legal Costs and Disbursements
I would recommend you call at least 2 lawyers and ask what their fees are for closing on both buying and selling… and be sure to ask for the cost of disbursements. Your lawyer will check the title to the property to ensure it is free and clean of liens or encumbrances.
Land Transfer Tax
This tax is levied on every purchase and covers the cost of transferring the property to the new owner. There are sometimes reductions offered by the Government for first time homes buyers, or senior buyers. It usually calculates to be about 1% + – of the purchase price.
The house inspection will usually reveal small repairs or items to make note of for future repairs. Sometimes it is just a bit of paint, of replacing an electrical outlet.. or as large as replacing the roof, or furnace. Take note, or bring a camera with you to record what repairs must be made, and also those repairs you would like to make in the future. Your house inspector can offer an estimate on the cost of these repairs.
Make room in your budget for replacement items, such as window treatments or new appliances, You may want to consider replacing the carpet with hardwood floors. Costs will vary, depending on the items you choose to replace, but once again, get more than one quotation.
Try to avoid moving at the end of the month, as moving companies normally charge a higher rate. June 30th is a date to avoid at all costs. Get at least 2 estimates, and if you are moving small items yourself, make sure to include the cost of the small truck rental.
Ask your Realtor to help with an approximation of the costs involved so you can budget for them….. Be prepared before you go shopping for that new home and know exactly what it will cost. Make a list of expenses that you may incur that will help your budget.