Oftentimes even the most organized and detail oriented first-time homebuyer can overlook some unexpected costs that come with the purchase of their new home. We are outlining four of the costs that we most commonly see overlooked by homebuyers in hopes that we can better prepare you—and save you from a few surprises!
1. Closing Costs
Congratulations! Your offer was just accepted on your new home, you’re one step closer to adding a major asset to your portfolio! We don't want to shock or dampen the excitement of this moment. However, it's important that you factor in closing costs right at the beginning of your purchase.
The best time to do this is before applying for your pre-approval or making any offers on a home. Closing costs may include:
- Taxes (Land Transfer, Property, and others depending on what province you are in)
- Legal/notary fees
- Inspection/appraisal fees
A general rule of thumb is to set aside 1.5 per cent of the purchase price to account for the closing costs above. To plan ahead, consider speaking to a mortgage broker and your realtor. They can help you determine just how much you should set aside to accommodate those additional closing costs.
2. Utility Bills
If you've gotten used to living in a small space, such as a condo or an apartment, you may be surprised how much more water, heat, and energy you consume in a larger space such as a detached home or a townhouse. It's important to prepare for these as you do not want to have a “surprise” when your bill arrives in the mail and it's nearly double what you are used to spending!
Factoring in these bills is also crucial if you are going from renting to owning. Oftentimes the landlord will cover a portion of your utility bills or your cable/internet depending on your contract. Of course, once you are a homeowner, you are covering the entire cost! Ask family members, friends, even your mortgage broker or realtor what is a realistic cost for things such as cable and internet, water, heat, etc. You’d be surprised how fast they can add up!
3. Renovations and Updates
Unless you bought a newly built, brand new home, there is undoubtedly going to be future renovations and updates that you will want or need to do on your home. They may not need to happen right when you move in, but sometimes the unexpected does happen and having money set aside can make a world of difference. When you have your home inspection completed, make a prioritized list of what will need to be fixed/updated first, and set aside money each month for it. In addition to the “must do” updates/renovations, new property owners may also want to make aesthetic improvements, whether they intend to reside there or not. Naturally, a homeowner wants to make the place feel more like their own, and investors want to add value or make adjustments to make the asset more aesthetically pleasing.
4. Ongoing Maintenance
Homes require maintenance—all the time! Ask any homeowner and they will tell you that there is always home maintenance in one form or another happening.
A few common home maintenance costs may include:
- Gutter cleaning
- Roof repair/maintenance
- Drywall repair
- Furnace cleaning
- HVAC and Duct cleaning
- General plumbing and electrical fixes
Every home is different in regard to how much you should budget annually for regular maintenance. It will depend on the age of your home, square footage, climate in your region and overall condition of your home.
Being aware of these costs will make them easier to plan for. Ensuring you have budget set aside each month will relieve coming up with maintenance costs later. With these costs an the amount of your mortgage payments should generally not exceed 39 percent of your monthly household income. It will give you peace of mind in the long run and allow you to actually enjoy your new home!