Budgeting the Costs of Home Ownership

If you are getting more serious about purchasing a home, you've probably starting going over the costs and fees along the process. I've outlined some of the common costs and expenses you should consider budgeting for upfront when going into the home buying process, as well as some regular expenses you'll need to include in your budget.

Prior to Purchase:

Here are some of the possible expenses or costs associated with purchasing a home that come before the purchase has closed:

• Down Payment: You'll need to save at least the minimum required down payment for your purchase price, so you will need to budget this as savings if you do not already have it set aside. Read more about down payments here.
• Appraisal Fee: When you agree to purchase the house and move forward with a Mortgage application, many financial institutions will require an appraisal to be completed on the property to ensure the value of the property. This cost ranges from $99 to about $300, but ranges between lenders and financial institutions.
• Home Inspection: This will typically be recommended by your realtor/lawyer in the process to ensure the property has no issues before you close. This cost can range between $200 and $1,000 in Canada.
• Moving Costs: If you need to rent a truck, stay in a hotel or hire help to make the move from your current residence, there will be a range of additional costs to budget.

Closing Costs:

When you are all set to purchase the home, and have the Mortgage approved and funding, there are additional costs to consider for closing. Closing costs may include legal fees, land transfer taxes, home inspection fees, and title insurance.

• Legal Costs: You will need to hire a lawyer that specializes in real estate transactions to ensure the purchase and sale of the property has been done correctly and is legally registered to you. This fee ranges amongst lawyers, and can be anywhere from $500 to $2000 or more.
• Land Transfer Taxes: Land transfer tax is a tax that must be paid to the government when a property is purchased and the title is transferred to a new titleholder’s name. The amount depends on the property’s value and the province (or municipality) in which it is located. Some provinces also have additional municipal land transfer taxes on top of the provincial amount. Your lawyer can assist you with understanding this cost.

After Purchase/Ongoing Costs:

Now that you own the home, there will be expenses and costs you will need to budget for regularly as part of your budget:

• Mortgage Payment (the major monthly expense to pay down your loan).
• Home Insurance (to protect your property)
• Mortgage Insurance (ex. Life/Critical Illness Coverage)
• Condo Fees (you may have monthly fees to pay to live in a condo).
• Repairs & Maintenance (you will need to have money set aside for this regularly)
• Repaying Home Buyers Plan Withdrawal from RRSP (If you borrwered funds from your RRSP for the down payment, you will be required to pay them back over time).

While this is a good list of costs to understand, it may not be all of them when it comes to your home purchase, depending on the province and city or your individual situation. It is best to speak with a Lawyer, Realtor and Mortgage Specialist about the details of home ownership and the costs prior to purchasing to ensure you have budgeted correctly.