Costs Associated with Buying a Home
If you’re considering to purchase your first house or your next house, it’s a good idea to plan ahead and consider all the costs associated with buying a home in Canada.
Your closing costs represent the things you will have to pay for out of your pocket, and the amount of money necessary to finalize the purchase of your new property.
The best time to work through the costs associated with closing your mortgage is before you even start looking for a place to buy. Closing costs should be part of the pre-approval conversation; they are just as important as saving for your down payment.
Here is a list of the things that will cost you money:
Real Estate Agent
As a buyer, it is in your best interest to work with a Real Estate Agent. It is NO COST to the buyer, and the seller is responsible for paying the commission for both the buyer and seller. Discount brokerages are currently discounting the commissions on listings by providing a “no commission” approach but buyers may have issues with this approach as they may need to pay for the difference in what the Real Estate Agent’s commission is. Sellers may have issues with selling their properties under discount brokerages as agents may not want to show the home if they are not receiving full commission. It is unethical for any real estate agent to not show a property based on these reasons, but in a soft market, it may be something to think about.
Home Inspection or Appraisal
A home inspection is when you hire a professional to assess the condition of the property to make sure that you won’t be surprised by unexpected issues. The home inspector is hired after the fact of a conditional offer is placed
An appraisal is when you hire a professional to compare the value of the property against other properties that have recently sold in the area.
The cost of a home inspection is yours, while the cost of the appraisal can be covered by high-ratio insurance, or sometimes your responsibility depending on your specific circumstances.
Lawyer or Notary Fees
To handle all the legal paperwork, you will be required to hire a real estate lawyer. Real Estate lawyers protect your interest and provide disbursements to the city (property taxes), to the real estate agents, any HOA, Banks/Mortgages or any liens on the property. It is important to have a different lawyer than the other party’s lawyer so that they can represent you fully. Costs vary for individual lawyer fees. You may shop around for the best rate for Real Estate lawyers.
Depending on which province you live in, and the purchase price of the property you are buying, you might have to pay a property transfer tax or land transfer tax. This will be determined by the lawyer.
Before any financial institution lends you money, they will want to see that you already have property/home insurance in place for the purchase.
Unlike property insurance, which is mandatory, you might also consider mortgage insurance, life insurance, or a disability insurance policy that protects you in case of unforeseen events.
Don’t underestimate the cost of moving your stuff. Sometimes it’s worth to hire someone to handle the stress of moving.
Hooking up new services to a property is more time consuming than costly. However, if you’re moving to a new province or don’t have a history of paying utilities, you might be required to come up with a deposit for services.\
If your community has any premium features, i.e. community association, private parks, green space, man-made lake - expect to see a Home Ownership Association Fee. A homeowners association fee (HOA fee) is an amount of money that must be paid monthly by owners of certain types of residential properties, and HOAs collect these fees to assist with maintaining and improving properties in the association. These are typically owed to the association at an annual level, but can vary for the community.