When buying a home it’s easy to forget about all the additional expenses that go into a house purchase, over and above your mortgage costs, so be sure to take into account the following costs as outlined in the book, Investing for Canadians for Dummies:
Inspection fees
It’s a good idea to get a professional to check out your prospective purchase before buying. Inspectors c an tell if you if there’s any issues with the plumbing, heating electrical systems, foundation, roof and if there’s any infestation problems. An inspection will typically cost around $200 – $300.
Appraisal fee
When you get your mortgage, many lenders will require you to get a home appraisal to get an independent view of it’s value. This can cost from $150 and up. Some of our partners on RateSupermarket.ca can cover your appraisal fees, so be sure to ask when you’re speaking to them.
Survey fee
Surveys are done by a registered land surveyor and usually must be done for each sale unless the last survey was done very recently (such as within 6 months). It involves a drawing of the property so that you and the lender ensure everything is on the actual property, your neighbours houses aren’t on your land and all zoning requirements have been followed. Tyical costs are $400 – $500.
Legal fees
Consulting a lawyer before you buy a house is highly advisable. They will help with doing a title search which makes sure the seller owns the home and can actually sell it to you and there aren’t any claims against it. It also helps to protect you because if the lawyer confirms that the seller has the right to sell the property and there are no claims against it (free and marketable title) and its later found they were wrong, you can pursue the lawyer.
Title insurance
As there is a type of insurance for everything, when you buy a home, you can buy title insurance. This protects you financially against the issues listed above of the seller not owning the home and if there are any claims against the property.
Moving costs
Although you think you, a couple of friends and a case of beer will take care of all the moving, if you compare this against the time, cost and stress of doing it yourself, it might be worth it to get some moving quotes. Here is a good place to start to get free moving quotes.
Real estate agents’ commissions
This can be in the region of 5-7%, but can be a waste of money nowadays, as there are so many websites selling homes privately where you can save on these commissions. We just sold a house ourselves and saved $23,500 in commissions! Type in “for sale by owner” in a search engine to at least check out what’s offered before buying.
The book recommends planning to stay in your new home for at least 3 years to ensure that you recoup all these additional costs. Don’t forget the price of maintenance for fixing leaky pipes, flooding basements, painting, and if you’re not a handy DIY-er then it’ll cost even more to get professionals in. The value of the home needs to appreciate by about 15%/annualy over the years you own it to get ahead of where you’d be if you rented – so take careful consideration before buying.
The Canadian real estate market has been doing tremendously well over the past few years, despite the recession, so don’t plan for this to continue indefinitely. Like the old saying about the stock market, you want to buy low and sell high, not buy high and hope it continues going up. Most likely many of the smart property investors are holding fire right now until the market comes down, so be sure to do your research , speak to some professionals and consider your options before buying.
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