When you ask people about their goals, what are some of the answers you get? There are a variety of answers, ranging from traveling, starting a family, buying a car, and retiring early. In addition to all this, the most common answer is usually “own a property”.
With this goal in mind, people start to save diligently. They stuff money into their RRSPs, TFSA, and just regular savings accounts to save for that down payment. After a few years of hard work and hard savings, they’re finally ready to buy a home, and manage to qualify for a mortgage?
Unfortunately, this is often not the case, because there are many other costs that you aren’t told about until closing day. That’s right, on top of your mortgage payment, you’re looking at plenty of other costs. To make sure you’re properly prepared, let’s take a look at what costs you’ll be facing before you can property enjoy your dream home.
These are some of the costs you may incur before the closing date on your purchase:
1. Professional home inspection– Are you sure the offer you’re making is the correct one? Do you know that the property value is actually what the seller claims? To be most certain, you may consider hiring a home inspection expert who knows what to look for in the details you wouldn’t even know about
2. Property insurance– Many lenders will require you to have property insurance before they’ll lend you the money. In the event where the property becomes damaged, they want to make sure that they’re protected, first and foremost.
3. Lawyer or notary fees– In order to make the title transfer happen, you’ll need a professional to prepare the documents for you.
Upon closing date, you not only need to make the first payment on your mortgage, there will be addition costs on top of that
1. Property transfer tax– Unless you’re a first time homebuyer, you’ll have to pay the property transfer tax. The tax itself depends on the purchase price of the property, and if the property is below a certain amount, you won’t have to pay.
2. GST– For new homes purchased directly from builders, there will be a GST tax on top of that. Again, depending on the home price, you may receive a GST rebate.
3. Prepaid taxes, utilities, strata fees– Sometimes the previous homeowner will have prepaid the year’s property taxes, or other utility and strata costs. As the buyer, you’re expected to reimburse the seller starting from the date you possess the property.
After you finally have your own, you still need to consider the additional costs on top of your regular, monthly mortgage payment:
1. Strata fees– If you live in a condo, townhome, and some standalone houses, you’ll have to pay strata fees. They are based on the square footage of your home
2. Property taxes– This is a big one. Even if you qualify for homeowner’s grants, it is still advisable to save up towards your property taxes that is due once or twice a year, depending in which municipality you are located
3. Moving costs– Don’t’ forget that you have to move everything into your new place! Movers aren’t cheap, and even renting a truck could be costly
4. Maintenance costs– With age and use, homes require upkeep. Some of your budget should go here as well.
Not only is it important to budget for your mortgage, but you should also make sure you’re aware of all the potential upcoming costs associated with buying a property. With adequate preparation, you’ll be able to focus your attention on enjoying your new home!
Finjoy Capital is not a financial advisory firm.
This article is for informational purposes only and is not a substitute for individualized professional advice.