Buying your first home is an exciting event. In fact, for most of us, it’s the most significant purchase we may ever make. As a new homeowner, you put a lot of work into buying the right home for you at the right price and getting the best first mortgage possible, but there are other costs you need to plan for. If you don’t, you could be in for a bit of a rude awakening. I’m going to show you how to avoid this additional financial stress.
Closing costs include lawyer’s fees and disbursements as well as land transfer tax. A good idea for budgeting purposes is to allow for 1.5% of your purchase price to cover these costs. So, if you paid $300,000 for your home, budget for up to $4,500 for closing costs. The good news is if you are a first time homebuyer, you’ll get a break of $2,000 off your land transfer tax as a result of the Home Buyer’s Plan. If this is not your first home, that discount will not apply.
Depending on whether or not your mortgage is insured, your lender can ask you for a property appraisal. The fee for this service should be somewhere between $350 – $450 dollars.
A home inspection is done before you waive conditions on your new home. It’s very important to ensure that you’re buying the home you think you are buying and a professional inspector is trained to see things that the average person wouldn’t. The price for this service varies depending on the size of the property. Generally, if you budget between $300-$400, you’ll be covered.
Home and Fire Insurance
Getting home and fire insurance isn’t difficult, but I recommend you do your homework here and compare options between companies. Annual insurance fees can range between $500-$1,000, and can be paid monthly.
Other things to consider
First time homebuyers are in a special situation. This is a completely new experience for them. To that end, you should also budget for operating costs to avoid being “house poor” in your new home. A lot of these costs can also apply whether or not you own a home. These include heat, gas, hydro, water or septic, groceries, cable and mortgage life or disability insurance, should you decide they make sense for you.
This might seem like a lot to consider, but believe me, when you go in to ownership aware and prepared, you’ll start out on the right foot, from day one, and that will make a big, positive difference in your life as a home owner.
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