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A home is likely the single largest purchase a person will ever make. The first thing buyers should consider is whether they can afford to buy a home and, if so, how much they can afford to spend.
While your mortgage payment is likely to be your highest single expense in purchasing a home, there are other expenses to consider. This includes both one-time and on-going costs, such as:
The Canada Mortgage and House Corporation suggests that your annual housing costs should not be more than 32% of your gross income.
Most people finance the purchase of a home through a mortgage. There are several costs associated with doing so, including the down payment and interest. Some mortgages also require default insurance. Learn more about mortgages at Financing a Home Purchase.
Legal costs in a real estate transaction consist of two main parts: fees and disbursements. Fees are what the lawyer charges for professional services. They do the work to represent you and protect your interests in the transaction. Fees may vary from lawyer to lawyer.
Disbursements are the out-of-pocket expenses that are paid on your behalf. Generally, disbursements will be the same regardless of which lawyer you choose. These costs can include things like:
Buyers must pay property taxes for the portion of time they will own the home in the current tax year. As property taxes are paid in advance in many cases, this may result in the buyer having to reimburse the seller. For example, a seller may have already paid the taxes for January to December. If the buyer takes possession on October 1, they will need to repay the seller for the taxes paid from October to December.
Additionally, property taxes will need to be paid yearly while you own the house. These taxes are paid to the municipality where the property is located. If you have a mortgage, your lender may require you to pay property taxes through them. Some municipalities also offer a monthly payment plan, such as TIPPs. You can find out the amount of property taxes for the home you are considering from your real estate agent, lawyer or the municipality. Failing to pay property taxes can result in the municipality taking title to the property.
The goods and services tax (GST) applies to new homes and homes that have been substantially renovated or re-located. You may qualify for a partial rebate of this amount if the property is your primary place of residence.
While it is not required, buyers often want to have a home inspection done by a professional. This inspection evaluates the condition of the home and reveals potential problem areas. The cost of this will vary based on who provides the service and things like the size of the property.
If a recent surveyor's real property report has not been done for the property, the buyer may need to have one prepared. A survey indicates the exact boundaries of the property and any easements. This is important because it will show whether part of the garage, shed, fence or house itself is located on someone else's property. It would also show whether a building on someone else's land may encroach onto the property you want to buy. Either situation can affect the value of the property and a lender's decision to give a mortgage on it.
Sometimes a buyer may get title insurance if a surveyor's real property report is not available. This provides compensation if there are any issues with the property's boundaries.
The buyer will generally incur moving expenses when moving into a new home. Costs for this could include things like hiring a moving company, renting a truck or trailer, storage costs and professional cleaners.
Unlike some renters, buyers will be responsible for heating, water and electricity costs. This includes the cost of hooking up the utilities under the name of the new owner. The current owner of the home can provide potential buyers with information about the average cost of utility bills. Factors like property size and energy efficiency can affect the cost of utilities. Buyers may want to consider this when making the decision to buy.
If the property is a condominium, there will be condo fees. These fees cover the costs that apply to the condominium as a whole. For example, eventually the roof will need to be repaired or replaced. Condo fees will often go towards a fund to cover expenses such as that. Condo fees also may or may not cover some utility costs.
As a homeowner, you will eventually need to perform repairs or renovations. You should consider the condition of the house and anticipated repairs when deciding whether to buy a home or how much to pay. You will also need to invest in the tools and materials needed to perform repairs that you do yourself. Homes require regular maintenance to things like furnace filters and smoke alarms. This all increases the cost of owning a home.
If you are moving into a larger place, you may want to buy furnishings to fill the space. This could be things like furniture, appliances, and window coverings. If you need to buy new furnishings, this will increase the initial cost of buying a home. Consider when certain appliances, such as a furnace, which are included with the purchase may need to be replaced.
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