Part 2: Unexpected costs of buying and owning a home
Spending hundreds of thousands of dollars on a new home is not an easy thing to do, and having the right team in place to assist you is an important first step. The second, and equally important part of the home buying process is to be financially prepared for the costs of buying a home.
When shopping for a home, it’s very common to focus solely on the listing price. We all want a good deal, so it’s not surprising that we start out by focussing on the price of the homes we are considering. However, something that most people don’t account for is the additional costs above and beyond the listing price, that also factor into the price of a home. If you are buying a home for the first time, these unexpected costs can easily add up.
Below, I have listed some of these additional costs that will help you to be aware of what to expect when it comes to actually purchasing the home that you want to buy. All costs are a one – time fee unless otherwise indicated.
Home Appraisal – a home appraisal is usually done at the discretion of the buyer or the lender and helps to determine the market value of a home. Cost: ~$500
Home Inspection – a home inspection is usually done at the discretion of the buyer or the lender and helps to determine the condition of the home. Cost: ~$500
Property Transfer Tax – the property transfer tax is paid when a home is purchased, other than if you are a first time home buyer (my next article will cover this in further detail). Cost: 1% on the first $200k and 2% on the balance
Legal/Notary Fees – the services of a lawyer (or notary) are required to search the title, draw up mortgage documents, register new ownership and liens and look after other closing details such as disbursement of funds. Legal costs vary depending on the lawyers’ practices and the complexity of your transaction. Cost: $500-$1500
Mortgage Insurance – mortgage insurance is required by most lenders if you are purchasing a home with less than 20% down. This insures the bank against a default on the mortgage and can either be paid in a lump sum or combined with your mortgage payment. Cost: See the following Table
Home Insurance – home insurance is required by the lender before the closing date of your sale to protect against fire, earthquake, and other types of losses. costs range based on the age, location, and size of the home. Cost: $1000-$2000/year
Property Tax – property tax is paid every year to the provincial government, and funds are used for public schools and other local services. The amount of property tax you pay is based on the BC assessment value of your property and can vary considerably. Cost: $2000-$3000/year
Renovations and Repairs – until you move into a home, you never truly know what type of repairs or renovations that may be needed. Certain renovations must be taken care of immediately, while others can wait. I usually recommend clients to have at least $3000-$4000 set aside for mandatory updates and repairs once they move into a home.
There are many additional costs that you should be prepared for when buying your first home. I’d recommend budgeting 1-2% of the purchase price of the home to go towards these costs so that you are not overwhelmed and overextended when it is time to transfer the property into your name. With that said, a lot of these costs are flexible and can vary depending on who you choose to work with. As mentioned in my previous article, by choosing the right team to assist you, you will be one step ahead and could save thousands of dollars on closing costs.
Check back for Part 3 of my guide which will go over the tax credits and incentives available for first time home buyers.
If you are looking for a real estate agent in Surrey or have any questions about buying a home in Surrey, feel free to contact me directly at firstname.lastname@example.org
Part 3: Tax credits and incentives available for first time home buyers
Part 1: Choosing the right team