Buying a home is an exciting journey, but it's also one of the most significant financial decisions you'll make. While many buyers focus on the purchase price and securing a mortgage, it's essential to plan for other upfront costs that come with homeownership. To help you prepare, we've outlined the key expenses you should budget for when buying a home.
1. Deposit
Once your offer to purchase a home is accepted, you'll need to make a deposit within 24 hours. This amount, typically ranging from 1-3% of the purchase price, is part of your down payment.
2. Down Payment
The down payment is a critical component of your home purchase. For homes under $500,000, a minimum of 5% is required. For any portion of the price over $500,000, you'll need at least 10%. If you're opting for a conventional mortgage, a 20% down payment is mandatory. Some lenders may also charge an application fee, so it’s worth checking with your lender or mortgage broker for any additional costs.
3. High Ratio Insurance
If your down payment is less than 20%, you’ll need High Ratio Insurance, which protects the lender in case of default. The insurance premium can range from 0.6% to 4.5% of the loan amount and can either be added to your monthly mortgage payments or paid in full at the time of purchase.
4. Home Inspection Fee
Before finalizing your purchase, a home inspection is highly recommended. This report, which costs between $500 - $750, provides a detailed assessment of the home’s condition. Depending on the property, additional inspections (e.g., well, septic, or pool) may be necessary.
5. Interest Adjustment
You may need to pay interest for the period between your closing day and the first mortgage payment. Your lender can provide specific details based on your situation.
6. Appraisal Fee
Your mortgage lender may require an appraisal to determine the property's value for financing purposes. This typically costs between $150 - $200.
7. Land Transfer Tax
In Ottawa, you'll be responsible for paying the Land Transfer Tax at the time of closing. The tax is calculated as a percentage of the property’s purchase price and varies depending on the value of the home. For example, the rate is 0.5% on the first $55,000, 1% on the amount between $55,000 and $250,000, and increases incrementally for higher amounts.
8. Prepaid Property Taxes and Utility Bills
You may need to reimburse the seller for any prepaid costs, such as property taxes or utility bills, as of the closing date.
9. Property Insurance
Your lender will require property insurance as a condition of the mortgage. This insurance protects the structure of your home and typically needs to be in place by the closing date.
10. Title Insurance
Title insurance protects you against potential issues with the property's title and is often recommended by lenders and lawyers. This is a one-time cost of approximately $250.
11. Legal Fees and Disbursements
Legal fees cover the cost of transferring the property and other related services. Expect to pay a minimum of $1,300 plus HST at closing.
12. Monthly Expenses
After closing, you’ll need to budget for ongoing monthly expenses, including your mortgage payment, mortgage insurance (if applicable), property taxes, home insurance, utilities, condo fees (if applicable), and maintenance costs.
Final Thoughts
Understanding the full range of costs involved in buying a home will help you plan your budget and avoid surprises along the way. By accounting for these expenses upfront, you’ll be better prepared for a smooth and successful home-buying experience.
Ready to Take the Next Step?
Buying a home is a significant investment, and we're here to help you navigate the process with confidence. Whether you’re just starting to explore your options or ready to make an offer, our team of experienced real estate professionals is here to guide you every step of the way.
Contact us today to schedule a consultation and let us help you make your home-buying journey as smooth and successful as possible.
E: Info@cherrypickhomes.com
P: 613-875-7929
