The Hidden Costs of Buying a Home
Home buyers may overlook additional expenses when budgeting for a new home as they prepare to pay for the house's purchase price and closing costs. Make sure you're making a well-informed purchase decision by allocating sufficient funds upfront and understanding precisely what expenses go beyond the purchase price to prevent surprises from occurring down the line!
From taxes to unexpected repairs, here are some important financial factors to account for when budgeting for a new home.
Property taxes are a recurring, yearly expense
One cost that many buyers forget about is taxes! You will likely need to pay property taxes, which can vary depending on your city and province. Property taxes are paid every single year and reassessed regularly, so they may increase as your property value appreciates. You can read more about property taxes here:
There can also be transfer taxes related to transferring titles from one person to another. In addition, in certain parts of the country, there can also be additional taxes, such as school district or county levies, that need to be factored in when calculating your overall cost.
Pay attention to land transfer taxes when considering titles. The property buyer pays for a land transfer tax added on the cost of passing the title of a property to another person. Land transfer tax varies from province to province and depends on the sale price of the land and property. The fair market value of the land you have to purchase is often also considered.
Don’t forget about mortgage and homeowner’s insurance
Remember insurance when planning on buying a property, too. It's mandatory for home buyers who pay less than a 20% down payment to get mortgage insurance, which covers the liability of not being able to make mortgage payments in the future. Other types of coverage, like flood or windstorm insurance, will also vary depending on where you live. Find out if there is a bundle with your mortgage payments.
Having adequate insurance coverage will help protect your financial investment and provide safety for yourself and others living on-site. So it's worth considering when making plans for your property.
Real estate agent commission
When buying a new home, it's essential to work with a real estate agent that will help you navigate the potential costs. Whether buying for yourself, with your family or friends or purchasing an investment property, a real estate agent will answer your questions and guide you to find your dream home.
Sellers pay out the listing and buying agent commission, whereas buyers pay for the land transfer tax and title insurance. Total commission can be around 3.5% to 5% of the total selling price. It’s a small investment for peace of mind and real estate agent expertise, but one that is worth budgeting for.
Finding your first home should be an exciting experience; the journey can be enjoyable with the right resources and expertise. If you're a prospective home buyer ready to secure a property, contact an experienced real estate agent to discuss your goals and help you navigate the changing real estate markets across Ontario.
Download Zoocasa's free Buyer's Guide for everything you need to know about the home purchase journey, including searching for a home, making offers, and preparing for closing day.
