To avoid unpleasant surprises, it's essential to understand all the costs involved in order to plan your budget properly.
Without further ado, here are the 10 most common costs to consider when buying a home:
1- The downpayment
The downpayment is the amount of money you must pay when you buy your home. It represents a portion of the total cost of your property and is generally at least 5% of the property's value.
Although the minimum amount varies by province and the value of the home you wish to purchase, in Quebec it's 5% for properties under $500,000 and 10% for properties over $500,000.
If your downpayment represents less than 20% of the purchase price of the property, you'll need mortgage loan insurance.
2- Inspection
It's always a good idea to have the property you're looking at inspected by a professional who can identify any items in need of repair. A pre-purchase inspection can be a good investment, since it could save you a lot of trouble in the future.
However, costs vary according to the size of the property and the complexity of the inspection. Expect to pay at least $500 to deal with a certified inspector recognized by an association.
3- The notary
Notary fees are the costs involved in preparing and signing the legal documents for the purchase of your home.
In Quebec, it is mandatory to go before a notary for all your real estate transactions. At the buyer's expense, costs again vary according to the complexity of the purchase, but are generally between $1,500 and $3,000, depending on the case.
4- Home insurance
Home insurance is mandatory when you buy a property. It protects your investment (and therefore that of your financial institution) against damage caused by unforeseen events such as fire or flood.
Policyholders usually have two choices: basic (or specified risks) and comprehensive. The difference between basic and comprehensive home insurance lies in the level of coverage offered by each type.
Basic cover provides basic coverage for damage to your property caused by fire, water damage, theft, or vandalism. This means that you will be compensated in the event of a claim, but only for the damage specifically mentioned in your insurance contract.
On the other hand, the “all risk” option offers more comprehensive coverage for your property. In addition to covering damage caused by the events listed in the basic option, it also covers accidental damage and loss of personal property. This means that if something happens to your property or personal belongings, you'll be covered, no matter the cause of the damage.
In general, comprehensive insurance is more expensive than basic insurance because its coverage is more extensive. Ask your insurer for details and compare prices!
5- Moving
Moving costs can vary according to the distance you have to cover and the quantity of goods you have to transport. It's important to anticipate these costs to avoid any surprises.
In most cases, you'll need to consider the cost of renting a truck, labor, mileage, insurance, and temporary storage if applicable.
Moving for work or school? You may be able to deduct moving expenses paid during the year on your next income tax return if you meet the eligibility requirements.
6- Property transfer tax
Also known as the "welcome tax", real estate transfer duties are provincial or municipal taxes that you will have to pay when you purchase a property.
The amount of this tax is calculated as a percentage of the property's value and can vary depending on the municipality in which the property is located. In general, it ranges from 0.5% to 2% of the property's value. You will be required to pay this fee at the time the real estate transaction is completed, i.e., when the deed of sale is drawn up by the notary.
7- Home renovations
If you're planning to carry out renovations or improvements on the property, you'll need to factor these costs into your budget. Renovation costs can vary considerably depending on the type of renovation you're planning. The sky is the limit!
In some cases, renovations can make your home more energy-efficient and have a significant impact on its value.
8- Annual costs
Each year, you'll need to plan for the expenses incurred by your property. These include:
- Taxes, including municipal and school taxes;
- Energy costs, such as electricity, gas and water;
- Condominium fees if you own a condo;
- Services such as Internet, cable, and snow removal;
- Etc.
These costs can vary depending on the city and the value of the property you're buying.
9- Home maintenance
Maintaining your property is essential to preserving its full resale value over time. Repairs and maintenance of the roof, windows, doors, walls, and floors are all important.
Outside: mowing the lawn, trimming shrubs, cleaning walkways and balconies, and collecting fallen leaves in the fall are all likely to cost you a few extra dollars.
10- Appraisal
The appraisal of your property is important in determining its true value. It helps define the market value of your home and serves as the starting point for obtaining a mortgage.
Starting at a few hundred dollars and rising to over $1,000, the cost of a property appraisal can vary depending on the size of the property.
Does your financial institution require it as a condition of mortgage financing? If so, the costs may be included directly in your financing agreement. If that is the case, you won't have to pay any additional costs.
