The Costs Associated With Buying a Home
If you're planning on buying a home, the last thing you need are unpleasant surprises. Here are some of the expenses you can expect to pay, so that you can plan your budget accordingly.
Pre-purchase home inspection
If you're buying an existing property, it's important to use the services of a building inspector to reduce the chances of finding defects later on. It will also help you avoid unpleasant surprises that could potentially cost you a lot of money. The price of an inspection varies from city to city and depends on the building's characteristics, but you can expect to pay between $450 and $550.
Down payment and mortgage loan insurance
For the down payment, you must calculate – at minimum – an amount representing 5% of the value of the property. However, if your down payment is less than 20% of the market value of the property, you will be required to take out mortgage loan insurance. The premium for this insurance will be between 0.5% and 2.9% of the total amount borrowed.
Once the offer to purchase is signed, it's important to use the services of a notary to avoid unwanted costs, such as the transfer of the seller's debts to your name or being liable for the seller's mortgage debt. Notary fees depend on:
- The type of building
- The number of dwellings (if you purchase an income property)
- The number of buyers
- The complexity of your file (the amount of time the notary will need to invest)
While the best way to estimate notary fees is by contacting a notary directly, you can expect to pay between $1,000 and $1,500.
Welcome tax (property transfer duties)
From a few weeks to a few months after buying your home, your municipality will require you to pay transfer duties. The amount depends on the value of your property, and will consider the higher amount between the price paid and the municipal assessment.
For a property that sold for $260,000, your transfer duties will be calculated as follows:
- 0.5% on the first $50,000 = $50,000 x 0.5% = $250
- 1% on the portion between $50,000 and $250,000 = $250,000 - $50,000 = $200,000 x 1% = $2,000
- 1.5% on the portion exceeding $250,000 = $260,000 - $250,000 = $10,000 x 1.5% = $150
- 2% on the portion exceeding $500,000 (in Montreal only)The total amount will therefore be: $250 + $2,000 + $150 = $2,400. Property transfer duties can differ from one municipality to another.
School and municipal taxes
While the welcome tax only applies at the time of purchase, municipal taxes and school taxes are recurring expenses. If the seller of your home has already paid these taxes for the current year, you will have to reimburse the prorated amount when you go to the notary.
Connecting to the power grid, as well as to cable and Internet services, involves costs that we often forget. Contact the various service providers to choose your package and learn the associated costs.
If you hire professional movers, you should expect to pay an hourly rate that varies between $50 and $250, depending on when you're moving. Shop around to make sure you get the best price. If you decide to call on your friends to help you move, plan to spend between $200 and $300 for the truck rental, as well as the pizza!
Buying furniture and appliances
New homes often mean new appliances and furniture, especially if you're moving from a small home to a larger one. The cost will depend on the models you choose. It's important to stick to your budget, as the cost of these items can rise quite quickly.
Even if you buy a recent construction, it is often necessary to do minor work, such as refreshing the paint in some of the rooms. Otherwise, if you decide to undertake larger renovations, you will spend approximately $10,000 to redo a bathroom and between $25,000 and $75,000 to redo a kitchen.
Buying a new home is often synonymous with stress, both emotional and financial. Your real estate broker can assist and guide you through the process. To find a broker, consult the directory of real estate brokers in Quebec.