The Top 6 Hidden Costs Of Buying A Home
As the second most affordable city in North America, it’s no wonder that many young Canadians and families are looking to purchase homes in Edmonton. Despite rising interest rates, the Edmonton real estate market is still among the most stable and affordable in Canada.
While it can be daunting to start looking for a new home, it’s very possible in today’s market to find that dream property at a competitive price. It’s all about doing your research and being prepared!
It’s not uncommon for new buyers to get so wrapped up in the excitement of purchasing a new home that they forget all about the hidden expenses of buying a home.
From petty expenses like lunch after a faraway viewing and gas money to big-ticket items like the home inspection fees and property taxes, it’s essential to stay ahead of the buying game by budgeting for these costs.
Now, let’s dive into the granular expenses that homeowners can expect when purchasing a new home:
1. Necessary Repairs
A vital step of the buying experience is conducting a home inspection after negotiating an offer. Inspections help identify critical issues like roof repairs, electrical problems, inefficient HVAC systems, and more.
Usually you negotiate the price upfront for things you can see, and the home inspection is there to look for things you cannot (eg- moisture behind a wall). While the discovery of some repairs may help to lower the asking price, a buyer may need to get these issues fixed before moving in.
Aside from these larger issues, buyers may need renovations to bring the home up to a liveable standard. They also may want to have certian things updated before they move in…no one wants to live in a construction zone!
2. Property Registration Fees
In Canada, municipal or provincial governments will typically dictate any property taxes.
Anyone who purchases property will have to pay to transfer ownership of the property to their name.
Luckily for those interested in Edmonton real estate, Alberta does not charge a land transfer tax - which slashes a hefty expense.
Instead, Alberta charges a property registration fee, which consists of the property value and the mortgage itself. To calculate your estimated property value, factor in a base of $50 plus an additional $2 for every $5,000 of the purchase price. The mortgage is another $50 base amount plus an additional $1.50 for every $5,000 of the purchase price.
3. Property Taxes
Buyers may need to pay a portion of the annual property taxes on top of the home cost.
Known as a property tax adjustment, this ensures that you pay taxes only for the allotted time you own the home. A buyer must pay the property taxes from the closing date to the end of the tax year. This could also mean reimbursing the seller if they have already paid these taxes.
Buyers who purchase their homes later in the year will have less time to save up for the following year’s property tax. While not an immediate expense for new homeowners, it’s not uncommon to be unprepared to prepare to pay a property tax bill after just moving in and paying for all these hidden costs of buying a home!
4. Legal Fees
Another expense often forgotten during the whirlwind process of purchasing a home is that of lawyer fees.
The amount of the fees will depend on the home’s purchase price and the lawyer or notary. The legal expenses also include ordering a title search and registering the title.
Be sure to consult with your REALTOR® about their recommendations for legal professionals in your area!
5. GST/HST
Once again, those interested in Edmonton real estate have it a little easier, as Alberta doesn’t charge a provincial sales tax.
Only buyers purchasing a new build or condo will need to pay GST. Even so, many rebates and exemptions are in place to help with this cost.
Although not as significant as a sales tax, it’s still worth noting that buyers will also have to pay GST on transactions like legal fees.
6. Homeowners Insurance
In most cases, mortgage lenders will require that you show proof of homeowners insurance before you take possession of a home. Proof of this insurance is required three business days before the closing date.
Buyers may need a full year of homeowners insurance up front for those who are paying home insurance through the mortgage lender. On average, annual policy fees for homeowners insurance ranges from $1,500-$3,000.
Every policy has different payment structures, and each mortgage lender has different requirements. When getting pre-approved for a mortgage, be sure to ask about these requirements.
Besides the typical homeowner’s insurance, buyers may also want to consider title, mortgage, or term life insurance, which can further increase those hidden costs of buying a home.
Contact Jeneen Today!
Have more questions regarding the intricacies of home purchasing? I’m here to make the process as smooth as possible! As one of Edmonton’s top REALTORS®, I want to work with you to find your new dream property.
Contact Jeneen by phone at (780) 904-4240 or via email at jeneens@remax.net.
