The Hidden Costs of Buying a Home
Buying a home is one of the largest – and smartest – investments you are likely to ever make. It can be one of the most exciting (or terrifying) times in your life and during the process it’s all too easy to forget about the many closing costs, such as legal fees, and other one-time expenses associated with the purchase of a home in Kelowna that can take you from under-budget to over in less time than it takes to seal the deal.
Here’s a dozen of standard costs to consider before you make your first offer:
When you submit an offer to buy a home, the deposit demonstrates your commitment to the seller to complete the purchase. The deposit is reassurance that you are acting in good faith and have the means to purchase the home. It also shows that you are comfortable taking on some level of risk by putting down a deposit until the deal closes. If you are required to pay a deposit, it will become part of your down payment once you have purchased the home.
A mortgage down payment is the amount of money you pay upfront when purchasing a home. A down payment, typically expressed as a percentage, is calculated as the dollar value of the down payment divided by the home price. In Canada, the minimum amount you need to put down on a home is 5%. While this is realistic for most first-time home buyers, having a down payment of 20% or more will help buyers avoid paying Mortgage Loan Insurance.
Land Transfer Tax
When you a buy a house, condo or land in BC you are subject to land transfer tax which is due upon closing. Loathed by home buyers, this tax may be levied in your area but there could also be reductions for first time or senior buyers. To calculate the amount, click here.
If you are mortgaging your Kelowna property, the lender will want to know the estimated value of the home. The lender requires the appraisal as part of underwriting to verify the value of collateral for a mortgage. Appraisals for lending reasons are done on a case-by-case basis for a lender if in their assessment of risk, a confirmation of market value is required. The appraisal fee may vary depending on the lender.
A home inspection is a necessary step in your home buying process and will normally cost an average of $350 depending on the size, age, and condition of the home. This helps ensure there are no unexpected maintenance or home improvement costs upon purchasing the home.
You need homeowner’s insurance to be protected in case a disaster strikes in your new Kelowna home. The insurance may cover windstorm or hail, fire or lightning, theft or freezing of plumbing system. Your home insurance may also reimburse you for your financial loss arising from accidental losses such as water damage. It may also ensure you are protected against lawsuits arising from ownership of your property or your personal actions.
There is mortgage life insurance, which is designed to protect the repayment of a mortgage if anything were to happen to you. There is also mortgage loan insurance if your down payment is less than 20% of the total house cost. Premiums for this type of insurance range from 0.5% to 3% and increase if you are self employed.
The fee you will be charged by your lawyer will vary depending on the person representing you and must be paid upon closing. Ask your real estate agent for advice as they likely have a preferred trusted lawyer they can refer you to.
Title insurance is a one-time-fee that provides protection from losses related to the properties title or ownership. Learn more about what it is in this blog post.
The cost for property taxes is expressed as a dollar rate for every $1,000 estimated to be the market value of your property.
Property Maintenance and Repair Costs
This is often an overlooked cost of home ownership. Depending on the value and condition of the home you buy, maintenance and repair costs can easily run 1% or more of the purchase price per year. On a $300,000 home, at 1% per annum, that’s another $3,000 in non-deductible annual expenses — or $250 a month. You can use our monthly home budget planner to help map out these costs.
It’s easy to forget about the small things when moving, but it’s important to remember they can add up quickly! Consider the cost for phone, electricity, and other utility installations and don’t forget about movers, a moving truck and feeding your friends who are helping!
Now that you have a better idea of the cost to buy a Kelowna home for sale, it’s time to hit the books to find out how much these services will cost in your area. Make a list, create a budget, and get started! In the market to purchase Kelowna Real Estate? Get in touch today!