When buying a home, most Canadians focus on the down payment and mortgage but the hidden costs of buying a home in Canada can easily add thousands to your final bill. These miscellaneous costs that are very difficult to determine include land transfer taxes, legal fees and home inspections that first time buyers are usually caught off guard. Canada Mortgage and Housing Corporation (CMHC) (cmhc-schl.gc.ca) recommends that buyers reserve 1.5- 4% more of the purchase price as closing and incidental costs. Knowing these unknown expenses prior to making an offer may also enable you to remain financially fit and avoid the rush at the last moment.
1. Land Transfer Tax
The land transfer tax is one of the biggest hidden costs of buying a home in Canada. All provinces levy it and a few cities such as Toronto impose a municipal land transfer tax over it. As an example, when you purchase a house worth 700000 in Toronto, you may pay close to 20000 dollars in provincial and municipal transfer taxes.
Hack:First time customers can receive partial rebates, thus, it is best to check out local government websites prior to sealing the deal.
2. Lawyer charges and Title Insurance.
A real estate attorney will be required to pursue all the documents, examine the buying contract, and make sure that the transfer of ownership is valid. Depending on the complexity, legal fees are usually between 1000 and 2500. You will also probably require title insurance that cushions you against title problems of properties including liens or fraud. This adds roughly another $300–$500.
They are normal but necessary expenses that are not taken into account by first-time buyers when budgeting.
3. Home Inspection Fees
Home inspection assists in unearthing possible structural defects, plumbing problems or electricity faults in the purchase before it is completed. Although it is not a requirement, missing it will cost you a lot more in the future in repairs. Inspection cost is between 400-700 on average but it is essential in making informed choices.
Consider it as a security to yourself, a humble fee that will protect you against huge financial costs in the future.
4. Appraisal and Mortgage Fees
To satisfy your lender that the value of the property in the market is the same as the price you paid, he or she might ask you to hire a professional home appraiser. The fees billed during appraisal are between 300 and 500.
Also, you may incur mortgage set up charges, CMHC insurance premiums (when your down payment is less than 20 per cent) and administrative fees that will vary with your mortgage lender. All these might amount to 1 percent or above of your mortgage value.
5. Moving and Utility Set up Costs.
New homeowners usually have to incur a slew of small yet necessary costs after closing: moving trucks, new locks, setting up of utilities, and hydro, water or gas deposits. These can be added up in no time and they can take you to the cost of over 1,000-2,000, particularly when it comes to long distance moving or replacing appliances.
6. Home Insurance and Property taxes.
Another of the hidden costs of buying your first home is the ongoing financial responsibility after purchase. The property taxes are dependent on where you are but usually cost 1-1.5 percent of home valuation per year. You will also be required to have the home insurance which the lenders will want to make sure before issuing the mortgage funds that ranges between an average of $800-1500 per annual coverage depending on type of property and covers.
7. Maintenance and Repairs
Owning a home entails maintenance and it is not taken seriously. It is advisable to save 1% to 3 percent of the value of your house annually as maintenance. These expenses can be quickly accumulated in case of roof leaks, and replacement of furnaces.
When purchasing an older house, it is prudent to plan ahead on upgrades such as windows, insulation or a new water heater.
The Reason Why It is Important to Learn about These Hidden Costs.
Understanding the hidden costs of buying a home ensures you’re financially ready for every step. Most of the buyers just add the price of buying and the down payment, and neglect the thousands of closing, inspection and law costs that come along with it. These have to be factored in and then you are sure to set your budget and negotiate at the best of bargain.
As a Realtor Haseeb Sheikh I assist people to determine all possible costs in advance to avoid the unexpected costs in the offer and ownership. Under professional guidance, the process of buying will be easier and more transparent.
Final Thoughts
Home buying is the largest purchase that you will make in your life, and it is also laden with financial undertones. It can be legal charges or even inspections and taxes and by knowing these costs beforehand you save time, money and stress.
So, before you sign that offer, take time to calculate the hidden costs of buying a home in Canada and get expert advice from a trusted realtor who knows the process inside and out.
