Buying a home is an exciting step! Many people dream of the day they will own their first home and spend a long time saving up a down deposit for it. However, there are unexpected costs when buying your first home. It is important to properly estimate your expenses to keep your lovely new home from becoming a financial burden. From hiring a lawyer, to unexpected maintenance expenses, read on as we help you prepare a more reasonable expectation of the costs associated with homeownership.
Moving costs are an expense worth considering when you buy your first home. Depending on how far you need to move and how much stuff you need to move, costs can add up. However, you can lower these costs by hiring an affordable moving company and moving in the off-season, when prices may be lower. It is important to get a quote based on how far you are moving and how much stuff you have, and then make sure to work this amount into your budget.
Good, old closing costs. One of the unexpected costs when buying your first home is a variety of closing costs. Closing costs include all of the expenses that are necessary when purchasing a home. According to RBC you should budget about 3% of the cost of your home for moving costs. So if the home you purchased was $200,000, you will want to budget at least $6000 for the closing costs. These costs including expenses such as legal fees, initial property insurance, and an initial home inspection.
Mortgage Default Insurance
If your down-payment is less than 20% then you will be required to get mortgage default insurance. This can usually be added to your mortgage payments, but depending on the situation, may be required upfront as well. According to BMO, you should expect between 0.6-6.5% of the cost of the loan.
Ongoing Taxes and Insurance
Owning a home is, understandably, more expensive than renting one. Part of the reason for this has to do with homeowners insurance and property taxes. Insurance rates vary a lot, so make sure you get a few different quotes and plan for these expenses before purchasing a new home. Property taxes can also be a rather large expense. These taxes vary across Canada. It is important to figure out what you will be paying in tax before purchasing a home. Typically, these taxes will be between $3.50-6.50 per $1000 every year. Looking into your cities taxation level will help you avoid an unexpected tax bill after you have purchased your home.
You may already have some furnishings on hand from your renting days, but depending on the size of your home you will likely need to look at getting some more. This can include items such as:
- Coffee Tables
- Mattress and Headboard
- Night Tables
You will likely spend an increased amount on decor, because lets face it, you will probably care more now that you have your own home!
If you have been renting, you are likely in the habit of calling your landlord as soon as something breaks down. They are the ones who are responsible for fixing the problem and paying for it. Once you have your own place however, this responsibility is on you. It’s a good idea to have some money set aside for ongoing maintenance costs. For newer homes, budget approximately 4% annually for repairs. In an older home, it’s a good idea to budget about 6%.
Buying a new home can be an exciting time. If you are well prepared and sure you can afford it, it can be the best decision of your life. Ensuring your are financially ready to own your own home however is one of the most important preparations you can make. So make sure you consider all possible expenses before moving forward!