10 Additional Costs of Buying a New Home you Must Account for in your Budget
There are many costs associated with buying a home other than just the price of the home itself. If you have purchased a home before, you are well aware of the extra expenses that are associated with buying a new home.
If you are buying your first home, you are quickly becoming acclimated to the extra money you will have to fork over to become a homeowner. And, if you are just starting to explore options for buying a home, it’s important to become familiar with and plan for the following additional costs of buying a new home.
Make sure the following 10 costs are on your radar when buying a home or you could be in for an unwanted surprise:
- Mortgage insurance: Most first time home buyers are surprised to find out that they will have to pay mortgage insurance as part of their agreement with their mortgage lender. You are required to pay this fee (which can range for 0.5% to 2.75% of the total cost of your mortgage) if you do not put down at least 20% on your down payment. The good news is that you have options for how you can pay this fee. You can pay the fee upfront or you can bundle it into the total cost of your mortgage. Check out Tips for Saving for a Mortgage
- Home insurance: You are required to have a home insurance policy before a lender will sign off on your mortgage. The cost of your home insurance will depend on multiple factors such as your location, cost and size of your home, and the scope of coverage that is included in your home insurance policy. Want to save money on your home insurance? Get a free home insurance quote today!
- Home inspection: Never skip the home inspection. It is arguably the most important cost and it is well worth the price. Getting a home inspection before buying will provide you with some much needed information about the overall condition of the home. The last thing you want to happen is to skip the home inspection, only to find you have costly issues with the home once you move in. Expect to pay between $200-$500.
- Legal fees: You will need to hire a lawyer to handle the documentation, title search, register ownership, and manage the disbursement of funds that are included in the transaction. Fees vary based on your legal needs and the details of the transaction, but expect to pay about $1,500 or more. These fees commonly include the cost of title insurance. Contact your lawyer for their fee schedule.
- Property survey: Your mortgage lender may require you to have the property surveyed to verify information about the dimensions of the property. Be prepared to pay for a property survey if required.
- Land transfer tax: You are required to pay a land transfer tax in Ontario. The fee is based on a percentage of the purchase price. If you are a first time homebuyer you qualify for a $2,000 rebate.
- Moving costs: Moving costs can creep up on you. From the cost of the moving truck, moving supplies, paying for movers, fuel for the moving truck, and moving truck insurance, costs can add up quickly.
- Furniture and fixtures: People often buy new furniture, fixtures and décor items to dress up their new home. While this expense is optional, you can easily spend thousands of dollars on these items once you move it. Don’t forget to include these in the costs of buying your home.
- Miscellaneous costs: As soon as you move in, especially if you are a first time home buyer, you will quickly realize you have a huge list of items to buy for your home. You will need to get things like a lawn mower, brooms, cleaning supplies, garbage bins, door mats, garden tools, and many others.
- Repairs, Replacement, and Renovations: Everyone likes to put their personal touch on a new home. For some this is doing a few cosmetic changes (i.e. painting), for others it’s performing a couple minor repairs, and others do full home renovations. Regardless of your approach, make sure you account for it financially.
Did any of these costs catch you off guard? How many of them were you unaware of?