Buying a new home can be very exciting to say the least. It can also be very stressful as many large decisions are made in a relatively short period of time.
Most of the time we consider only the down payment on a home when we think of the cost of purchasing but that is not the whole picture. This week we take a look at the other costs you will incur when purchasing a home.
1. Legal fees – every mortgage has to be registered by a lawyer. There are a wide variety of things which are included in the legal fees. They normally start about $1,250 for the purchase of a new home. If you are selling there are legal fees there as well to discharge the mortgage and make sure your legal rights are protected.
2. GST – if you are purchasing an existing home there will not be GST however you will incur this cost on a brand new home.
3. Home inspections – there are a number of inspections which can be done prior to purchase of a home. Prices will vary so look around.
• Property – a well-qualified home inspector will go through the home with a fine tooth comb. They will be able to point out any issues or give you a thumbs up on the property
• Sewer – if you are purchasing a home in a mature area with full grown trees this has the potential to save you money and strife. The technician uses specialized equipment to go through the sewer lines and watch for any roots which may have grown into the line.
• Asbestos – this is seen in fewer houses as time goes by but again if you are purchasing an older home it can be a good thing to check for.
The benefits of the inspections listed above are both peace of mind and additional leverage with the seller to decrease the price or have the repairs completed prior to you moving in. The cost of the repairs can also be added to the mortgage if quotes for the work are obtained as a part of the mortgage approval.
4. Mortgage default insurance – if you have less than 20% to put down on a home you will be required to pay mortgage default insurance. It is based on a percentage of the purchase price and decreases as you put down more money. It is a onetime cost and will be added to the mortgage.
5. Title insurance – this is a one-time cost of about $305+GST. It is collected at the lawyer’s office and is used often in lieu of a real property report.
6. Property taxes – one of the costs of owning a home are taxes. If the person you are purchasing from has prepaid the taxes you will be required to come up with additional funds to reimburse them for this.
7. Condo fees – if you have purchased a condo then you will likely have condo fees. Be sure to have the condo docs reviewed ahead of time to reassure yourself the association is in good standing and you will not soon face a large cash call to help resolve some past building issue.
8. Utility deposits – depending on how strong your credit is, you may be required to provide a small deposit with the utility companies prior to connection.
9. Home insurance – when there is a mortgage on a property there is also a legal responsibility to have home insurance. Costs will vary and all policies are not created equal so it is a good idea to check around for the best protection.
10. Mortgage Penalty – if you selling then purchasing and are unable to move you current mortgage to the new property for whatever reason, then you will incur a penalty to break that contract. Call your mortgage provider for details.
11. Appraisal – if you are purchasing a home privately or putting more than 20% down there may be a requirement to get an appraisal. This can cost anywhere from 4300-$500.
12. Moving – this one is pretty self-explanatory. You may need to rent a truck or hire a mover depending on your circumstances.
13. Personal insurance – once you have purchased your home you really MUST protect your investment. Make sure you have sufficient life, disability and critical illness insurance.
14. Realtor – if you are selling through a real estate agent you will have negotiated at the time of the listing their fee. This will be collected at the lawyer’s office when the funds are received for the sale and paid directly to the realtor.
So as you can see there are more costs than initially meet the eye when it comes to purchasing a home. Having an idea of them ahead of time can save you headaches later. Til next time!
Pam Pikkert is a mortgage broker with Mortgage Alliance – Regional Mortgage Group in Red Deer.
