Ahhh, the hint of Spring is in the air.... the buds are ready to burst .... and of course, buying your new home. Nothing is more exciting than buying your new home.... except maybe falling or being in love.
Buying a home is a very emotional event... and can be very stressful ... and in the excitment of the process, its all too easy to forget the additional costs involved in any transaction of buying a home.
Here are just a few of the costs involved you need to know about, so you can budget for them.
This is an absolute must have, for both re-sale and newer homes. Ask your agent to insert that condition in your offer. Home inspections usually take about 2 - 2 1/2 hours and the cost will range from $375.00 - $450.00 depending on the size of the home, and whether the basement is finished.
When applying for your mortgage for your new home, most financial institutions require that an appraisal be done to determine how much they are prepared to lend you. If this is not covered in the cost of the mortgage, it usually runs about $200.00 - $250,00.
Discuss the various payment options with your financial institution i.e. monthly, bi-monthly, weekly etc., to determine which one suits your needs.. Also discuss types and terms of the mortgage. Types would open, closed, etc. and term means how long these rates will apply, i.e. 6 month term, 2 year term or 5 year term. Amortization would indicate the total length or amortization period of the mortgage, i.e. 25 year, 30 year, etc. It would be advisable to obtain a pre-approval from your bank and lock in the interest rate while you shop for your home. This way, if the rates increase, you are locked in... If the rates decrease, you can get the lower rate. These are normally valid for a period 90-120 days.
If you are only putting 5% down on your mortgage, mortgage insurance is mandatory, and usually a requirement with a 20% downpyament, or less. It can include a minimal charge and would be slightly higher if you are self-empoyed without benefit of third party verification of income.
Title insurance is a one time charge that you can ask your lawyer to include in your closing costs. This will cover any unforeseen issues that you were not aware of that could appear after closing. Title Insurance costs depend on the value or purchase price of the home, but an average cost is about $250 - $300 and is a one time charge.
A survey document is an up to date document showing the exact property line, and all buildings, fences, etc. located on the property. In many cases the Vendor will have one, and if your lawyer insists on having one, plan on spending about $1,000 - $1,500. This would be beneficial if you are planning on making any changes to the property, i.e. installing a fence around the perimieter, installing a pool, etc.
This can sometimes be overlooked when calculating your monthly costs. Get a few quotations and make sure your enquire about any separate riders you may need for jewellery, furs, art, antiques, etc.
Some condos fees include costs such as hydro, heat, roofs, parking, windows etc., but some do not. These can be found in the Status Certificate, which your lawyer will review. He/she will look for any deficiencies in the financial position of the condo corporation, ensure the insurance on the property is sufficient and in place, any special assessments that may be coming up, and a review of the monthly condo costs.
Legal Costs and Disbursement
I would recommend you call at least 2 lawyers and ask what their fees are for closing on both buying and selling... and be sure to ask for the cost of disbursements. Your lawyer will check title to the property to ensure it is free and clean of liens or encumbrances.
Land Transfer Tax
This tax is levied on every purchase and covers the cost of transferring the property from the previous owner to the new owner. There are sometimes reductions offered by the Government for first time homes buyers, or senior buyers. It usually calculates to be about 1% + - of the purchase price.
The house inspection will usually reveal small repairs or items to make note of for future repairs. Sometimes it is just a bit of paint, of replacing an electrical outlet.. or as large as replacing the roof, or furnace. Take note, or bring a camera with you to record what repairs must be make, and also those repairs you would like to make in the future. Your house inspector can offer an estimate on the cost of these repairs. Your home inspection will usually be in written form and you will have a copy of any deficiencies the inspector noted in his report.
Make room in your budget for replacement items, such as window treatments, new appliancaes, or replacing the carpet with hardwood floors. Costs will vary, depending on the items you choose to replace, but once again, get more than one quotation.
Try to avoid moving at the end of the month, as moving companies normally charge a higher rate... June 30th is a date to avoid at all costs. Get at least 2 estimates, and if you are moving small items yourself, make sure to include the cost of the small truck rental.
Ask your Realtor to help with an approximation of the costs involved so you can budget for them..... The last thing you want are unexpected costs that could sabotage your purchase..... be prepared before you go shopping for that new home and know exactly what it will cost...