First-time home buyers are often shocked when they see the total amount, they need to pay on closing day. Knowing what to expect ahead of time can help you financially prepare. By familiarizing yourself with more than just your down payment and regular mortgage payments, nothing will come as a surprise on closing day.
Here are TOP 5 hidden costs that a lot of homeowners don’t factor into their budget before they apply for a mortgage.
Keep in mind that all of these fees depend on the property you’re buying and the agreement that you have with your lender.
Property Tax / Land transfer tax
Like any other purchase, the government may charge tax. When you buy a home, you should consider the below taxes:
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Property taxes, utilities and condo fees. The seller may have prepaid property taxes, utility bills or condo fees before you take ownership of the property. You reimburse the seller for the portion of the costs from the closing date forward.
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Land transfer tax. The government may charge land transfer tax when you buy a property. The tax is based on the home’s purchase price, and sometimes other factors. Most provinces charge provincial land transfer tax, but some cities charge their own municipal land transfer tax, too. Taxes vary by province and first-time home buyers may sometimes receive a rebate for part of the cost.
GST / QST
Welcome tax (Existing Properties), and GST (5%) + QST (9.975%) for new condos or houses only (New building Projects).
If you are looking at purchasing a new construction property, make sure you ask about the sales tax payable, and take the time to calculate it so you can budget for this amount.
Home inspection
Some buyers may think they can cut costs by skipping the home inspection, but the fee is minimal in comparison to what you may have to pay later without one. The cost of a home inspection usually ranges depending on the size of the home. And some lenders even require a professional inspection before issuing you a mortgage.
If you’re in the process of closing the deal on a home, a home inspection should be done promptly so you have the opportunity to uncover potential major issues with the property sooner rather than later.
A licensed professional home inspector understands the ins and outs of a home and can look into things like the roofing or foundation to do an accurate inspection. Since these flaws can be quite costly and you may want to bring them up with the seller, you’ll want to leave the inspection to an expert who can ensure structural safety and that all systems are functioning correctly.
Insurance:
While home, fire and content insurance is usually an expense that is considered right away during the home buying process, there are other types of insurance that can be overlooked. These can include things like title insurance, life insurance and mortgage insurance can come as surprise unexpected costs. When planning and going through the numbers associated with purchasing a home, make sure you take all types of insurance into account.
“Canadians owe $2.17 trillion in household debt, according to the Bank of Canada. More than 70% of that is residential mortgage debt. “
Legal Fees/ Notary
Another expense that is often forgotten during the whirlwind process of purchasing a home is that of lawyer fees. The exact amount varies depending on the purchase price of the home and differs based on the lawyer/notary. The legal expenses also often include ordering a title search and registering title.