Buying a Home? Consider the extra costs!
There are usually many costs, on top of the buying price, that you must consider when buying a home. These extra fees, such as taxes and other additional costs come into play whether you’re looking to buy your first home, or trading up to a larger or down to a smaller one. You will be surprised of an unwanted financial nightmare on the closing day if you’re not informed and prepared in advance. However, some of these costs are only one-time fixed payments, while others unfortunately represent an ongoing monthly or yearly commitment. It’s better to know about these cost ahead of time so you can budget properly, even if they don’t apply in your situation.
Whether it’s your first, second or tenth home, buying a home is a major milestone and there are many important details to address during the process. The last thing you need are unbudgeted financial obligations cropping up hours before you take possession of your new home.
Carefully view the following list to make sure you’re budgeting properly for your next move.
- Appraisal Fee – Your lending institution may request an appraisal of the property, which you will be responsible to pay for. Appraisals can vary in price from approximately $400 – $600.
- Survey Fee – If the home you purchase is a resale, your lending institution may ask for an updated property survey or location certificate. The price for this survey can vary between $800 – $1200 up to $2000.
- Property Taxes – Your lending institution may decide to include your property taxes in your monthly mortgage payments, depending on your down payment. If your property taxes are not added to your monthly payments, ensure to have room in your budget and annual proof that your taxes have been paid. Betterment charges may be included – be wary of additional costs.
- Property Insurance – Home insurance covers the replacement value of your home. Proof that you are insured will be requested by your lending institution as it protects their investment on the loan.
- Legal Fees – A lawyer must be involved to review all paperwork, even for the simplest of home purchases. Shop around, as rates vary greatly depending on the complexity of the issues and the experience of the lawyer. Legal fees will vary according to complexity, anywhere from $700-1200 plus disbursments and taxes on average.
- Mortgage Loan Insurance Fee – Depending upon the equity in your home, (less or greater then 20% down), some mortgages may require mortgage loan insurance. This type of insurance will cost you between 0.5% – 3.5% of the total amount of the mortgage. In addition to your mortgage and tax payment, these payments are also made monthly.
- Mortgage Brokers Fee – In order to source a lender and organize the financing, you will need a mortgage broker sometimes entitled to charge you a fee for his/her services. This generally only happens for B and C class mortgages. However, it better for you to look around because many mortgage brokers will provide their services free to you by having the lending institution absorb the cost.
- Moving Costs – The cost for a professional mover may vary in the range of: $50-$100/hour for a van and 3 movers, and 10-20% higher during peak demand seasons, like Christmas or March break.
- Service Charges – Any new utility that services your hook up, such as telephone or cable, may require an installation fee.
- Maintenance Fees – In your budget, ensure you have a section for maintenance fees, such as carpet cleaning or deck painting.
- Water Inspection/Quality and Quantity Considerations – If the home you purchased is serviced by a well, you must consider having your water checked regularly. During the buying process, you need to consider the costs of well inspection, as well as water quality and quantity tests. These three tests on average may cost from $100-$500 for both.
- Septic Inspection – If the home you purchased is serviced by a septic, you must consider the costs of having your septic tank pumped every two years. During the buying process, you need to consider the costs of septic inspection as well. On average, a complete inspection my cost between $300 – $500.
- Building inspection – Before you firm up the offer to purchase and sale, you will need to have a building inspection completed to protect yourself. The cost of this inspection can vary but may average in the $350 – $500 range.
- Local Improvements – If the town or neighbourhood you live in has made local improvements, such as the addition of sewers or sidewalks, it could impact the property’s tax by thousands of dollars, so ensure this is checked!
- Land Transfer Tax – Whenever a property changes hands, this tax will be applied. The amount that is applied can vary from one area to another however generally in HRM, the tax is 1.5% of the selling price of the home.
- Radon Gas Testing – Research has shown that Radon gas in confined areas such as the home significantly increases the risk of lung cancers. Although it is an optional cost to home buyers, it is good practice to know the conditions in which you are living. Tests will cost anywhere from $175-$250. If high levels of Radon gas are detected in your home from the tests, mitigations systems range from $1500-$3000.As you can see, taking those extra costs into consideration is very important. You need to budget properly for your next move to avoid facing any financial troubles. Consult your broker or sales associate if any extra costs will be applied to you. Remember, purchasing a home is a major milestone and if you plan your budget accordingly, you will enjoy the best of your home.