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For most people, buying a home is a colossal decision. It must be made carefully with special consideration for all costs involved to avoid regret or financial surprises down the road.
The reality is, most are unaware of all of the costs that come with buying a home – mainly because many of these costs are hidden, making them hard to prepare for.
“Part of the reason millennials don’t fully understand the costs involved in purchasing a home is due to the overwhelming amount of misinformation available,” explains Nobul CEO Regan McGee.
In an interview with Yahoo Finance Canada, McGee explains that millennial buyers “should try to educate themselves as much as possible and remember that there is very little correlation between the fees that they’re paying and the value that they are receiving.”
Before buying a home, make sure you identify all of these costs. These are the costs you are likely to accumulate when purchasing a home:
Agent commissions are one of the most prevalent costs associated with home buying. Nobul is a unique online real estate marketplace that shines a light on an agent’s experience, reviews, and commission rates to help homebuyers match with the right industry professional.
Buyers may notice that the agents with the highest commission rates aren’t necessarily the most experienced or most well-reviewed.
Your down payment is the upfront money you pay towards purchasing your home. Your mortgage loan covers the rest of the price.
Typically, a buyer’s down payment comes from their savings, though many first-time homebuyers are getting assistance from family nowadays due to rising property prices.
Mortgage Loan Insurance
The mortgage loan insurance shields your lender in the event that you default on your mortgage. You’ll have to pay it if your down payment doesn’t cover a certain percentage of the home’s price. In Canada, this is 20%. In some cases, you may have to pay for it even if your down payment is more than 20% of the price.
Some homebuyers also get optional mortgage life insurance plans to cover payments in case of illness, injury, disability, or death.
Land Transfer Tax
You will have to pay a land registration fee to register your home. The cost is a percentage of your home’s price and can be a significant sum. For example, for a 500,000 CAD home in Toronto, the total tax can be nearly 13,000 CAD. It’s even higher for nonresidents. However, first-time homebuyers can be eligible for partial or complete refunds.
Your home insurance protects your home from theft or damage. Mortgage lenders usually require it.
Home Appraisal Fees
Some lenders require buyers to have homes professionally appraised in order to be approved for a mortgage.
A home appraiser is different from a home inspector. While a home appraiser offers a professional opinion of a property’s value, a home inspector checks the home’s structure and systems to ensure everything is in working order. You may need to pay for both.
On the day you finalize your home purchase, you’ll have to pay your notary or lawyer a legal fee to review agreements and shield your legal interests. For example, a lawyer ensures that no one else has a legal claim over the property you’re buying.
You may need to hire professional movers to help you move into your new home. These costs depend on the distance to your new property and the volume and value of your items.
Please, consider using a professional and reputable moving company to avoid being victimized by moving scammers.
In addition, you may need to pay fees to hook-up utilities in your new home. Depending on the property’s condition, you may also have to pay repair and maintenance costs to ensure the home is livable.
Other Potential Costs
- Adjustment fees
- Interest adjustments
- Local levies
- Mortgage default insurance sales tax
- Water tests
- Condominium fees
Although the multiple costs of buying a home may seem daunting, building equity for your family’s future can be a worthwhile undertaking. Just remember to do your research and prepare for all expenses.
Disclaimer: This content does not necessarily represent the views of IWB.