The Hidden Costs of Buying a Home
In addition to your down payment, there are a few extra, yet necessary, costs you’ll need to prepare for when you buy a home. Avoid being caught off guard on closing day. Here’s what you need to know:
Home Inspection Costs
Depending on the conditions of sale, inspection costs may be covered by the buyer or seller. During the inspection, the home’s overall condition will be assessed with particular attention to mechanical systems (i.e. HVAC, electrical, plumbing) as well as its structural integrity. Inspections are important for helping you make a more informed decision about buying a home.
Unlike an inspection (assessing the condition of a home), an appraisal determines the home’s current market value. Typically required by mortgage lenders, the appraisal ensures the home’s assessed value is true to the requested loan amount. Appraisal fees will vary by property, but some lenders may cover the costs for you.
To distinguish your property lines from those of your neighbours, and to avoid any confusion down the road, your lender may also require an up-to-date land survey (Real Property Report). If recent enough, the lender may accept the previous survey or accept a copy of your Title Insurance as a substitute (more on that below).
Title Insurance policies protect both you and the lender from expenses related to title fraud, zoning violations, municipal work orders and other property-related complications or defects. Here again, your lender will ask you to provide proof of Title Insurance before approving your loan, with costs typically being added to your legal fees.
Legal Fees and Disbursements
Throughout the home buying process, your real estate lawyer is responsible for handling all legal paperwork associated with the transaction. This includes drafting mortgage contracts, overseeing the Offer to Purchase, ensuring your home is registered, looking after closing day finances and more.
Determined by your municipality, your property taxes are calculated according to your home’s assessed value and current local market conditions. You may opt to pay your property taxes in one lump sum once a year or, depending on the terms outlined in your mortgage, you may be eligible to pay in monthly installments – see the TIIP Program for more information.
Mortgage Default Insurance
Lenders issuing high-ratio mortgages (home purchases with a down payment of 19.99% or less), will require you to include mortgage default insurance into your mortgage. In short, this type of insurance is meant to protect the lender in the event of a default on your loan. Costs will vary according to the size of your down payment and the purchase price of the property.
Are you thinking about buying a home? Begin the journey to homeownership today by filling out a free copy of our online approval form! It only takes a minute, and we’ll be in touch soon.
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