Besides price, what are the costs of buying a home?
For the majority of people, buying a home is the most expensive purchase they will ever make (at least until they purchase their next home). The serious home buyer has already spoken with a lender before starting his/her search in earnest so they will know what price range of home to be looking for. But what about the other costs? What are the typical costs a home buyer must burden?
Down payment
On closing day (when you get the keys) you will need to put down 5% of the purchase price. The average price for a home in Kitchener-Waterloo is about $500,000 which means you will need at least $25,000 saved up for the down payment. If you want to avoid mortgage insurance you will have to have 20% of purchase price at the ready on closing day.
Deposit
Because contracts need something called “consideration” to be valid agreements and consideration is usually money, a deposit will be required from the buyer to the seller when an offer is accepted. This deposit is held in trust by the listing brokerage and will be returned to the buyer if the offer does not make it through the conditional phase. If the purchase is successful, the deposit amount will be put towards the down payment amount upon closing.
In Kitchener-Waterloo the deposit amount is usually 1-2% of purchase price. That means that you should have on average $5,000 to $10,000 at the ready when you make your first offer. In Kitchener-Waterloo personal cheques tend to be fine.
Home inspection
Now the market is balancing out again, most home purchases in the Kitchener-Waterloo area are conditional upon having a home inspection done. In some cases the $400 to $500 spent is simply for peace of mind. In other cases, structural issues, evidence of a wet basement or mould is found. You don’t want to buy someone else’s problem.
Land transfer tax (LTT)
In Ontario, homebuyers are responsible for paying the LTT. There are lots of LTT Calculators online. Here’s one. But using $500,000 again as an average Kitchener-Waterloo home price, your LTT would be $6,475.
Legal fees
You are going to need a lawyer and that is going to cost you legal fees and disbursements as well as title insurance. That should be approximately $1200 – $1800.
Other fees
If you buy a condo in Kitchener-Waterloo chances are you will have to purchase a Status Certificate. Those are $100. Moving will likely cost you truck rental or the cost of hiring a moving company. You may have to pay fees associated with getting a mortgage as well. The good news is that you won’t have to pay your Realtor a commission. The buyer’s agent commission is paid by the listing brokerage!
Summing up (no pun intended)
As you can see from above, the cost of buying a home is high. With the above example the fees excluding downpayment and deposit add up to nearly $10,000. Of course you should keep in mind that you are buying an appreciating assets you will recoup those costs pretty quickly.
