Buying a house can be both stressful and exciting. With the process of home buying comes multi fold choices and added costs. In such cases, you should be aware of the cost briefs and the payment expectations. The hidden costs of buying a house in Canada must be noted meticulously to prepare a comprehensive layout.
Apart from insurance and mortgage costs, there are a few additional costs that homeowners should address and factor in before preparing their final budget. We have a cumulative list of 10 hidden costs of buying a new home that you should keep note of as a new home buyer in Canada.
Closing Costs: Hidden Mortgage Fees
Hidden mortgage fees encompass the comprehensive fee paid while reaching the end of a real estate transaction. Listed below are the fees that are expected to be paid at this stage of the transaction:
- The fee of the lawyer
- Surveyance fee
- The cost of recording
- The fee of the documents issued
- Appraisal fees
- Title cost
- Inspection cost
- Home warranty fee
- Fee of the mortgage applications
- Sales brokerage commission fee
It is also important to communicate with your realtor about all the listed fees that need to be included in the closing costs and other hidden costs of buying a house in Canada.
Underline the utilities that you should be paying for when buying a home. These utilities might include the following:
- Gas services
- Water supply
- Cable and internet services
Make sure to address these utilities and services being installed.
Installing Novel Appliances
The installation of appliances and even their purchase is important yet subjective. Although, if you are buying a new home and installing everything from scratch, new appliances are an obvious added cost. But, if you are moving from one property to another, this additional cost can be avoided. Even for a resale house, the necessary appliances would have to be purchased or replaced, depending on their condition. In addition to these appliances, their installation might also factor in some additional costs that cannot be avoided.
Paying for the Escrow
It is a known fact that the buyers would be asked to pay for their escrow account beforehand to cover their expenses. These expenses might include insurance and property taxes. Some lenders would also require the extra amount to become an important part of the home buying budget.
Rate of Interests
The interest rates are unavoidable in obvious ways. But with a good credit rating, you can avoid high-interest rates. This can help you save in the long run. This is another bullet when we talk about the hidden costs of buying a home in Canada.
The Cost of Moving
Moving vans are not cheap and when you opt to hire a moving company, the cost of packing supplies, boxed, labour and time off work also add up. These costs would be highlighted differently in your budget, especially if you are moving a long distance. It is also important to note that the farther you are moving, the more costly the move would be for you.
The Cost of Earnest Money
Earnest money is quite similar to a security deposit that validates your interest in buying the property. This money is supposed to be paid while filling out the paperwork during the purchase.
Like any security deposit, you would be returned with your earnest money when the transaction goes through. However, you should educate yourself on all the clauses in the contract. This is also inclusive of the clause that talks about backing out of the deal, resulting in no returns. The bandwidth of earnest money can go from a few hundred dollars to a thousand or even more than that.
Homeowner’s insurance is something similar to Property taxes and is included in your mortgage rate that goes out monthly. Depending on the coverage needs, the value of homeowner’s insurance can either go up or down with other expenses.
The cost of school taxes depends on the district, and they would vary accordingly. If you do not have children, you might want to consider and pay attention to the anticipated costs that school taxes might bring. On the other hand, if you have kids eligible to go to school, the extra cost of school taxes would be an optimistic addition to your budget. School taxes could vary amongst different districts. So, make sure to pin this factor while moving.
Home Repairs and Maintenance
Home repairing and maintenance is something that is never off your budget. Be it buying a new home or moving into an older one, the cost of repairing and maintenance is only subjective in terms of the scale of the requirement. So, ensure to make all the necessary arrangements for the same as soon as you have access to your home after closing the deal.
If you aren’t preparing for any renovations right away, make sure to save some funds in case of any emergency anticipated repair costs. Also, keep a note of the cost of renovating your home while laying out your budget. Although you would not know the exact renovation costs, it’s best to keep an estimated amount in mind so that you don’t have to face any cash crunch later on.
Consult a professional financial advisor before making any decisions or laying out a budget for the hidden costs. Looping in all your advisors and experts would make all of this easier for you in the long run.
In a Nutshell
Buying a home is for sure an overwhelming procedure. And this is intensified ever more when hidden costs come to the forefront. Under such circumstances, awareness is the key to making optimal decisions. We need to be aware and educated about these hidden costs, which tag along during property purchase. The above-curated list details the hidden costs of buying a new home in Canada. These would help you be familiar with these anticipated costs beforehand so that you handle any excess expenses like a pro.
There are some expenses included in the mortgage payments like homeowners insurance and property taxes. This is also known as PITI, which means Principal, Interest, Taxes and Insurance. The lenders usually prefer PITI to be less than 28% or equal to the borrower’s total monthly income.
An average detached of buying a house in Canada costs around $688,208 with a down payment of $43,821 and a household income of $109,000.
One way to figure out how much mortgage should be paid from your income is to refer to the 28/36 rule. According to this, the mortgage payment that you make should be 36% of your total debt and should not be more than 28% of your monthly pre-tax income. This is also referred to as the DTI (Debt-to-Income) Ratio.
It is important to underline that monthly mortgage payments include more than just your mortgage. This can be addressed as the payment covering property taxes, homeowner’s insurance, the principal amount and interests.