Hidden Costs When Buying A Home In Canada

Hidden Costs When Buying a House

Now that my husband and I have finally started to save for a home of our own, it’s important that we look into every single detail that is involved with purchasing. It’s not as simple as picking a house you like and moving in. Buying a house is actually a lot of work.

We have many friends and family members that are always telling us we should move into our own place. They say that our mortgage would be the same price or less than our monthly rent. Apparently, they know nothing about how expensive it is to own a home.

There are so many fees involved with buying your own house such as land transfer tax, lawyers fees, realtors fees, etc. Not to mention a 20% down payment!

Let’s not forget that if something goes wrong with the house, like the roof is leaking or the hot water heater stops working – we are 100% responsible. No more running to the landlord to fix our problems. It’s a lot of money and we are not going to jump into home ownership until we are 100% ready (both financially and mentally).

Hidden Costs When Buying a Home in Canada

These are the fees you can expect to pay when you purchase a home in Canada (I’m going to use a $500,000 home as an example):

20% Down Payment

If put down any less than 20%, you will have to pay mortgage insurance (which costs $60-$175 per month). Total = $100,000

Lawyers Fee

You’ll definitely want to hire a lawyer to review the terms of the offer and make sure you aren’t getting a bad deal. Total = $2000 (approximately)

Land Transfer Tax

In Ontario, 0.5% is charged on the first $55,000, 1% is charged on $55,000 – $250,000 and 1.5% is charged on $250,000 to $400,000. $500,000 would be a $6475 tax. Check out Royale LePage for the Land Transfer Tax Calculator. Total = $6475

Home Inspection

This does not cost much money and in my opinion, is not only a good idea, but a necessary “to-do” before you sign on the dotted line. It’s important to know if there is anything wrong with the home before you purchase. Prices vary on the size of the home. Total = $500 (approximately)

Interest Adjustment

You will need to pay any interest accrued between your first mortgage payment and your closing date. Prices vary by payment frequency and closing date. Total = $500 (approximately)

Home Insurance

If you have a mortgage, you have home insurance. You have no choice in the matter. Prices vary on the cost of the home and the contents inside. Total = $800 Per Year (approximately)

Moving Costs

This time around, we are hiring movers – but you don’t have to. Do it yourself and save lots of cash. Total with movers = $1000 (approximately)

Maintenance

You should be setting aside 3%-5% of your home’s value every year for maintenance. You never know when you will have to get the roof re-shingled, the windows replaced or the carpet removed?. Total = $20,000 Per Year

Move-In Items

This may not apply to everyone, but for us, there will be things we will need to buy as soon as we move in like a couch set, bedroom set and probably a dining room set as well. We want to make sure that we have the money already saved so we can get these things right away. Total = $10,000

That is a grand total of $141,275.00 that we would need to save before we can buy a home of our own (if we were purchasing one for $500,000).

So, you see, it really isn’t cheap to purchase a home. If you are thinking about purchasing a home of your own, be sure to research everything that’s involved.

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Comments
  1. Erica says:

    When I start looking to get a house I’m going to hire you! lol

  2. admin says:

    OMGASH i sound dumb. i forgot that the realtor fees are only when you sell. duh! well there’s $25,000 less we have to save ๐Ÿ˜€

    bb, there is no way we will buy a house without 20% down. we are not willing to pay the monthly fee for putting down any less. we don’t care if we have to rent for another 5 years. we want to have a huge chunk of money saved up before we buy a house, not just for the downpayment, but for everything else as well. hubby makes great money and we know we will be able to afford a house in the next few years. this is not something we’re willing to rush.

  3. Ashley says:

    @admin: No worries, you don’t sound dumb at all. You have really done your research so far, and it sounds like you’ve looked in to pretty much everything that might arise when buying a house. There will still be things that you didn’t consider, or things that people will forget to tell you about.

  4. bb says:

    you didnt sound dumb at all.. lol i think most people forget that you dont pay fee’s when buying through a realtor,
    i think that is very smart of you to put down 20% it is the smartest way (i know first hand of those nasty fees for not putting down 20%.. 1 of the houses i have bought i only put 5% down and ended up with that lovely fee of 10k added onto my mortgage but i was desperate to own a house so it was worth it for us), i know you can do it in a few years your great at saving!!!
    But dont wait till you have 200k saved up or you wont be able to buy a house forever… when you have enough for 20% down and 10k for expenses then meet with a mortgage broker to go over the numbers to see if you can afford everything at that point… if not he will let you know approx. how much more money you will need ๐Ÿ™‚

  5. Mo says:

    There are income tax breaks for first time home buyers! Make sure you check those out.
    Do you have any RRSPs? You can use those if you are a first time home buyer, to put towards your down payment. Can get you into a house faster, and than you gradually put money back into them.

  6. admin says:

    i didn’t know there were tax breaks, thanks for letting me know!
    and i would never take my rrsp funds and put them into a house. those are for retirement! thanks for the suggestion, but no thanks. :p

    i think our main goal right now is the 20% down. once we get that, we will decide how much more we need. the 20% down is the hardest to save i think. once we have that, i think the other $41,000 will be a piece of cake!

  7. Ashley says:

    There are actually quite a few benefits when you are first time home buyer:

    http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html (First Time Home Buyer’s Tax credit)

    http://www.rev.gov.on.ca/en/refund/newhome/index.html (Land Transfer Tax Credit for First Time Buyer’s)

    There may be more, but those are the two I can think of at the moment ๐Ÿ™‚

    I just thought of another unexpected expense. When we were looking at condos to buy, our realtor told us how much the hydro and gas cost for each unit we looked at. The one we bought, we were told $65/month for hydro, $35/month for gas. No clue where they got those figures from, because our hydro is anywhere from $95-$150/month, and gas is $47/month! So when you are looking at houses, try to research for yourself what those utilities will cost you per month, because the rates the realtor provides may not be accurate at all.

  8. admin says:

    thanks Ashley! ๐Ÿ™‚

    and yes, i definetely agree with researching yourself for the hydro/etc. everyone’s useage is different.

  9. Theresa says:

    WOW…….$500000 for a house…YIKES!!!!!!!! We live in a small town in Ontario, and that kind of money would buy you a mansion. Our house on an acre, built 11 years ago cost $160 000. You must live in the GTA. Sorry about that! ๐Ÿ™‚

  10. happy.bunny says:

    i just went through this process, and walked at the last minute…

    couple of suggestions, go through a mortgage broker, they will be able to give you the best rate, and you get your pick of the bunch of mortgages… my bank wouldn’t touch the mortgage i wanted, but i went to a broker and had 5 different mortgages to choose from, and this was with no job, and a very limited income currently… mortgage brokers are gods imo…

    the second thing that struck me was you budgeted $500 for a home inspection… i just paid $1000 for the one i got done… and it was well worth the money, as they used an infra red technology, to see the actual insides of the house, looking at the framing, for rot and or any issues… there were other cheaper options, but i am so glad i went for the more expensive option, as it saved me from making a huge mistake.

    there are first time home buyers credits/ tax breakers, but only if all people on the mortgage are first timers… i was gonna have mine co-signed by my mother, and therefore wouldn’t get the credits. even though my mother has never bought a house, but she has 2 in her name…

    a broker where i live doesn’t charge you for their services, the banks/ unions/ mortgage lenders pay for bringing them business…

    as for lawyer fees, you don’t have to have a lawyer review it, you can have a notary (at least you can where i live) mine was a super efficient and hard working lady, who reviewed everything very closely with me and made sure i understood everything… and she charged very lil for her services… good luck with your adventure into buying, and hopefully it works out for you

  11. admin says:

    yeah, we live in the GTA and it is expensive. ๐Ÿ™

    thanks for those tips happy.bunny! the credits will be fine for us because neither of us have ever bought a house and aren’t co-signers (would never ever do that). i’ll definetely have to look into a notary instead of a lawyer. thanks for that one!

  12. Property tax is a big one that people tend not to research before they buy a house. It tends to go up higher after you buy a house if the purchase price is bigger than prior assessment.

  13. CeeCee says:

    This write up is a complete joke. If you are considering the purchase of a home you need to go and talk to all the reputable and knowledgable professionals like a realitor, mortgage broker/bank, ask friends for referals for lawyers they used and home inspectors and NEVER EVER purchase a home you sincerly cannot afford.

    On a side note, tell me WHO has managed to save over $100k before buying a home?? And can anyone sincerly say they save $20k a year for “home repairs”??? And if you have did you put the $20k into your home each year?

    What makes me the most angry about this post is you give the impression to people that owning a home is next to impossible. It is NOT. It can be done, do your research, save for your down payment and purchase within what you can afford. Lets be honest, if you weren’t paying your own mortgage you’d be paying rent (someone elses mortgage).

    • katy says:

      To answer your question about WHO can afford to save $100,000 for a home – lots of people. We did. We have friends that did. The same goes for putting away 3-5% for home repairs (we put aside 3%, and last year alone had to spend more than $15,000 for a new roof, to repair a bunch of cracks in our foundation, and some electrical work – if we hadn’t been putting aside that 3% each year, we would have been screwed).

      People need to stop buying a house just so they can say they own a home, and first weigh the pros and cons (and there are many cons!) of home ownership.

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