The thrill of buying your first house is unparalleled.
But did you realize that your financial obligations aren't restricted to a single monthly down payment?
And that there are certain unexpected costs associated with the house purchase that you should consider before signing the contract?
Knowing about them ahead of time will allow you to budget for the additional costs. Here are some of the hidden costs you should consider when buying a property.
Home Repairs And Aesthetic Improvements
Depending on the age and condition of the home, there will most certainly be items you wish to upgrade or fix.
True, when you move in, your house or apartment may not require any upgrades or maintenance. However, upgrading and/or fixing various rooms or areas of your property might significantly increase its worth if and when you decide to sell it, so it's something to think about.
In general, 3 - 5% of the value of your home should be spent on property maintenance. Common maintenance concerns include, but are not limited to, replacing windows, re-tiling/repairing the roof, installing a new hot water tank, adding new insulation, cleaning the vents/furnace, and so on.
Appliances, like everything else in the home, have a lifespan.
If you're purchasing a freshly constructed house, the appliances should be brand new and under warranty. The requirement to replace or repair an appliance when purchasing a resale house might vary greatly based on the age and condition of the equipment.
Most appliances can set you back several hundred dollars for the most basic models. With bells and lights, replacing a refrigerator may cost thousands of dollars. You may also be required to pay for installation, which can be costly if adjustments to electrical wiring or plumbing are required.
If you're a first-time buyer, you might be surprised by the cost of utilities, especially if your prior rental house included utilities.
Utilities for city dwellers might include:
- Septic tanks and wastewater drainage
- Garbage collection
- Natural gas
- Cable Wires
- Internet Connections
Costs for rural utilities may include:
- Sewage repair and maintenance
- Garbage collection
- Heat from wood or wood pellets
- Internet Connections
Larger homes are more expensive to heat and cool, and old houses may be less energy efficient unless they've had new windows put in and/or the insulation improved.
Insurance for homeowners
The cost of homeowners insurance will vary based on where you live, the type of coverage you get, any discounts you may be eligible for, and your insurer.
In general, you may anticipate spending around $35 per month for every $100,000 in a house worth in Canada. For example, if your property is worth $300,000, you'll pay roughly $105 each month for basic coverage. The cost is expected to be greater in high-risk locations.
Coverage for reconstructing or repairs following an earthquake or flood is typically not included in regular homeowners' policies, so you may wish to – or, in the case of flood insurance, must – purchase a separate policy.
Fees for homeowner associations
Homeowner associations, or HOAs, are non-profit organizations that can set and enforce regulations, supply basic services such as water, and care for community amenities such as pools, roads, and landscaping.
HOAs are often found in condominiums, townhouses, and planned single-family home communities and are managed by a board of residents. Dues are generally charged monthly or annually.
Dues vary greatly and might alter based on the requirements of the community. For example, an association that has neglected upkeep or wishes to create something like a new park might increase dues or levy special charges.
You'll need to hire a lawyer or notary to evaluate certain sections of the contract and fulfil different legal obligations during the home-buying process. Hiring any type of lawyer, especially one who specializes in real estate, may be expensive.
- Taxes on arrival
- Taxes on education
- Taxes on land transfers
- Taxes on real estate
- Harmonized sales taxes (HST): this varies by province.
- Goods and services taxes (GST): if you purchase or develop a brand new home/condo.
Prepaid Property Taxes, Prepaid Condo Fees, and Prepaid Utilities: If the seller has prepaid any of these charges, you must refund them for the amount spent.
Estoppel Certificate: This certificate is typically used in the case of condominium or strata (split ownership) units. It is signed between the renter and the landlord and serves as a kind of paperwork pertaining to the financial and legal status of the property.
Purchasing a home is undoubtedly something to be delighted of. For many people, purchasing a home represents a significant achievement in their life. It does, however, come with its own set of risk factors, hidden expenses, and terms and conditions. Taking a risk without fully understanding the process might send you into a tailspin.
Homeownership is a thrilling experience. When you get down to the nitty-gritty of purchasing a home and arrange your money correctly, you may prevent unnecessary confusion and difficulties later on.
If you’re looking for a real estate agent in Ontario who can help you minimize all these costs and provide you with the best suitable deal for you, let us know! We'd love to help you get started today! Feel free to contact us at firstname.lastname@example.org or 123-456-7890 with any queries