One Percent Realty January 8, 2014

Thinking about buying your beautiful dream home? That’s great! Just be aware of the many fees associated with buying a new home. Listed here are ten costs that can add up, and often, get overlooked when planning a move. A good realtor should be able to explain these costs and make sure that you are fully prepared before taking you on various open house trips.

1) Mortgage Insurance

Some mortgages are classified as high-ratio mortgages. This means that the bank is taking a substantially higher portion of the risk than the homeowner is. With this being said, if you buy a house with less than 20% down (high-ratio), then the government requires that your mortgage be insured against default. This can range from 0.5%-2.9% of the mortgage amount annually- meaning that it could cost between $60 and $175 EVERY month.

2) Legal Fees

A lawyer is an important part of the home buying process- they make sure that the contract is in good order so that neither party is left with an unfair deal. This could cost up to $2000 dollars.

3) Land Transfer Tax

This is a tax on land transfers that is specific for each province. Alberta and Saskatchewan have no land transfer tax. In Ontario, 0.5% is charged on the first $55,000, 1% on anything between $55,000 and $250,000, and 1.5% up to $400,000.

4) Home Inspection

Home inspection is an important step to take before signing an agreement. A professional home inspector will be able to look for flaws in everything from the foundations to the plumbing; from the roof to the electrical. Prices vary, but the approximate cost on an average-sized home is about $500- a small price to pay for peace of mind.

5) Fire Insurance

Not only will fire insurance allow for the replacement of items and property in the event of a fire, but many mortgage lenders also require it to cover the amount of the mortgage/value of the building. These costs can vary, depending on the size of your home and the value or your property and assets. Make sure to shop around and compare prices before signing a policy.

6) Appraisal Fee

An official appraisal is another thing that many mortgage lenders will require of their clients. This is an official assessment of the value of a home. It will also be beneficial for the buyer to know exactly what the house is worth- especially during the negotiation of the sale price. An appraisal will cost about $300. Sometimes a lender will pay for this in order to get your business.

7) Maintenance

Maintaining a house is expensive. Personal finance experts recommend that a family set aside 3%-4% of a home’s value each year for maintenance costs. You never know when you will need to replace windows, fix up the roof or replace a broken hot water tank.

8) Survey

A survey will ensure that you are buying the ownership of the property that you think you are. You do not want to sign an agreement and find out that your lot is smaller than you thought. Some lenders will also require an official survey. This will cost about $500.

9) Prepaid Property Tax or Utility Bills

If you buy a house in the middle of a month, a seller could ask you to reimburse them for prepaid property taxes or utilities. It is not very common, but be prepared nonetheless.

10) Move-in/Decorating Costs

Finally, there can be a lot of unforeseen move-in and decorating costs that should be taken into account before buying. An end table here, and a coat of paint there, can really add up. Know exactly how many chairs, garbage cans, area rugs and plumbing fixtures you will need to purchase before you move in.