udgeting for a new home can be tricky. Not only are there mortgage payments and the down payment to consider, but there are also a host of other—sometimes unexpected—expenses to add to the equation. The last thing you want is to be caught financially unprepared, blindsided by taxes and other hidden costs on closing day.
These expenses vary: some of them are one-time costs, while others will take the form of monthly or yearly installments. Some may not even apply to your particular case. But it’s best to educate yourself about all the possibilities, so you will be prepared for any situation, armed with the knowledge to budget accordingly for your move. Use the following list to determine which costs will apply to your situation prior to structuring your budget.
Almost all sellers will want you to put down an initial and additional deposit with the offer to purchase. This is a way to show that you’re serious about buying the home. The amount varies but is usually a small percentage of the home’s purchase price. Discuss with your real estate agent to understand the typical deposit amount based on the price range you’re shopping in for a home.
Although not the biggest amount of money, it’s still a substantial cost. Home inspections can reveal essential repairs and save you from future headaches. Prices can vary, so shop around and find out what each inspector includes in their inspection process. Typically, you can expect to pay between $300 and $600.
Your lending institution may request an appraisal of the property to ensure it’s worth the loan amount. In most cases, this cost falls on the buyer. This can cost between $350 to $1,000 or more, depending on the property and location.
If the home you’re purchasing is a resale (as opposed to a newly built home), your lending institution may request an updated property survey. The cost for this survey will be your responsibility and will range from $700 to $1,000.
This fee varies depending on the lending institution but is typically around $200 to $400. It’s a good idea to shop around and compare different mortgage lenders to see who offers the best rates and fees.
This fee applies to newly built homes only, or existing homes that have recently undergone extensive renovations. It’s essential to account for this when budgeting for a new home. GST is calculated at 5% of the purchase price.
A lawyer should be involved in every real estate transaction to review all paperwork. Experience and rates offered by lawyers range quite a bit, so shop around before you hire. Typically, legal fees for home purchases range from $800 to $2,000. Your lawyer will also handle the transfer of title and ensure there are no outstanding claims on the property.
Your home will serve as security against your loan for your financial institution. You will be required to buy insurance in an amount equal to or greater than the mortgage loan. Homeowner’s insurance costs vary but expect to pay around $1,000 annually.
With all of the hustling and busyness of buying a new home, moving expenses might be something you have on the back burner. Depending on how you intend to move and how much you have to move, this can cost you a lot of money. On average, it costs between $1,100 to $3,300. Because of this price range, you will want to get at least four quotes if you intend to use a mover.
Any utilities you arrange for at your new home, such as cable or telephone, may come with an installation fee. Find out which utility companies charge these fees, how much they charge, and take note of it. Shop around to see if you can get a deal with companies that offer the same service at a lower price. If you don’t want to switch providers, use these quotes as bargaining chips to see if you can get your current provider to waive their service charges or give you a better deal.
Interest adjustments occur when you close on a house at a time that does not coincide with the start of a mortgage payment period. You might need to pay some interest upfront, which can vary depending on the timing of your purchase and your lender’s terms.
In order to “make it their own,” many new homeowners like to paint or invest in other renovations prior to or upon moving into their new home. If this is your plan, budget accordingly. This expense, under most circumstances, is optional. If this is something that’s optional, any money that you might want to put toward renovations can first be allocated to essential costs to acquire the home.
If you’re buying a condo, you’ll need to consider the monthly condominium fees. Any feature sheets of a condominium your Realtor sends you will show the monthly fees. However, be aware of special assessments that might not be listed. This information should be found in the condo documents acquired by your Realtor for review. There are companies that can review these documents for you, providing a detailed analysis and projections about the financial health of the condo association, which can be very useful.
Unexpected expenses can easily run into the thousands of dollars. Being unprepared at the 11th hour can cost you even more money or worse. Knowing what you need financially gives you a clear picture of what you need to successfully purchase your home. Padding your budget slightly after calculations is a wise move. If the extra money is not needed, you now have funds you can put toward something else, like the renovations mentioned above.
While the list above covers many of the standard expenses, there are always a few more things to keep in mind when budgeting for your new home:
Property Taxes: Be aware that property taxes will be part of your annual expenses. These can vary widely depending on the location and value of your home. Make sure to factor this into your long-term budgeting.
Home Maintenance: Owning a home means taking on the responsibility of maintenance. From routine lawn care to unexpected repairs, having a maintenance budget is crucial. It’s often recommended to set aside 1-3% of your home’s purchase price annually for maintenance.
Home Warranties: Some buyers opt for home warranties, which can cover the cost of repairs or replacements for major home systems and appliances. These warranties typically cost a few hundred dollars per year but can provide peace of mind.
Furnishings and Appliances: If you’re moving from a smaller place or your current furniture doesn’t fit your new home’s style, you might need to purchase new furnishings or appliances. Budget for these items to avoid surprises.
Landscaping: If you’re moving into a home with a yard, consider the costs of landscaping and outdoor maintenance. Whether you plan to hire a service or do it yourself, it’s another expense to account for.
Buying a home is a significant financial commitment, and understanding all the associated costs is crucial for making a sound investment. By planning ahead and budgeting for these expenses, you can avoid surprises and ensure a smoother, less stressful home buying experience. Remember, the goal is not just to buy a house, but to create a home where you can thrive and build a future. So, take the time to plan carefully, seek advice when needed, and enjoy the exciting journey of becoming a homeowner.
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