Blog

From Down Payments to Moving Day: The Full Breakdown of Home Buying Costs


Indeed, achieving the milestone of buying a home often symbolizes success and independence. But it’s also a major financial move, and one that requires a deep understanding of the costs involved. If you’re looking to buy a home get ready to add up more expenses than just the purchase price of the property. Unexpected costs can catch you off guard if you’re not prepared.

For first-time buyers and even seasoned real estate investors, this comprehensive guide will walk you through every financial step. From the moment you consider making an offer, through the day you receive your keys, and into the ensuing weeks, this manual serves as a priceless tool. Grasping the full process is vital for aspiring homeowners in Canada’s prime locations.

Downpayment: The Initial Investment

The most significant upfront cost is your downpayment — a percentage of your home’s purchase price, paid upfront. For many buyers, scraping together this sum is the first hurdle to leap. In Canada, the minimum downpayment required depends on the purchase price. For homes up to $500,000, you need at least 5%; for homes from $500,001 to $999,999, you’ll need 5% on the first $500,000 and 10% on the remaining amount. For homes over a million, you’ll need 20%.

Home Inspection: Uncovered Problems Cost More

Once your offer is accepted, you will need to order an inspection to determine the home’s condition. It’s crucial to unearth any potential issues before it’s too late. The cost of a home inspection can range from $500 to $1,000, depending on the size and age of the property. Considering the peace of mind it can provide, it’s money well spent.

Appraisal: Verifying the Home’s Worth

An appraisal is a professional assessment of the home’s market value. This is usually required by your lender to ensure the property is worth the amount you’ve offered. An appraisal can cost from $300 to $500 and is non-negotiable.

Mortgage: The Heart of Home Financing

This is where you borrow the money to pay for your home. This is likely the largest debt you’ll ever take on, so shopping for the best rate is essential. Mortgage payments include the principal (the amount you borrowed) and interest (the cost of borrowing). With a fixed-rate mortgage, the interest rate stays the same for the term of the mortgage, and for adjustable-rate mortgages, the interest rate changes. 

Mortgage Default Insurance: A Safety Net for Lenders

If your downpayment is less than 20% of the home’s value, you need this insurance to safeguard the lender against the possibility of your default. The cost is a one-time fee, paid either in a lump sum or added to your mortgage. The amount, ranging from 2% to 4% of the home’s price, depends on your downpayment percentage.

Legal Fees: Navigating the Legal Seas

You need a lawyer or notary to complete the loan transaction before it is advanced. They’ll handle everything from a title search to verifying that all documents are properly executed. Legal fees are usually between $1,500 and $2,500, including disbursements.

Property Survey Certificate: Defining Your Land

Depending on the lender, you don’t always need a survey, but considering one would be a wise choice. A property survey will outline the precise boundaries of your land and ensure there are no encroachments from neighbours. It can cost between $350 and $700.

Property Transfer Tax: Paying Your Fair Share to the Government

In BC, we calculate this tax as a percentage of the property value, signifying a significant expense. For example, it’s 1% on the first $200,000, 2% on the portion greater than $200,000 and up to and including $2,000,000, and 3% on the portion of the fair market value greater than $2,000,000. First-time home buyers may be exempt from property transfer tax if the purchase price is less than $835,000 (effective April 1, 2024) and partially exempt if the purchase price is more than $835,000 but less than $860,000 (effective April 1, 2024). If the purchase price is less than $835,000 the purchaser will be exempt from property transfer tax on the first $500,000 of the purchase price of the property.

Goods and Services Tax (GST): A Federal Additional Cost

New Home buyers will have to pay GST on their purchase. At closing, you will pay 5% of the purchase price.

Adjustments for Utilities/Condo Fees: Ensuring a Fair Transition

When you assume ownership, you must pay for certain items prepaid by the seller, like property taxes, strata fees, and utilities.

Adjustments for Rentals and Security Deposits: Square Up

After finalizing your home purchase, you will need to negotiate and settle payments for any rented inclusions within the property and any required security deposits.

Property and House Insurance: Safeguard Your Investment

You’ll need insurance before your lender will advance your mortgage. This insurance covers your home in the event of damage or disaster. Costs vary widely depending on the value of your home, but can range from $500 to $3,000 annually.

Property Tax Adjustments: Settling the Bills

The property taxes for the year may have already been settled by the seller, even though they are typically paid on an annual basis. At closing, you’ll need to reimburse the seller for taxes from the date of closing to the end of the current tax year.

Move-In Fees for Strata: Into the Community

If you’re moving into a condominium, there are often strata move-in fees to consider. They can range from $50 to $500 and may cover administrative costs and the required move-in inspection.

Moving Costs: The Physical Transition

Moving expenses, often underestimated, can range from $1,000 locally to $5,000+ for long-distance. Professional movers, moving trucks, packing materials, and temporary storage can all contribute to this price.

Additional After-Moving Consideration Costs

After you’ve moved in, there are many other expenses to consider, including:

  • New Locks: For security, you’ll want to change or rekey your home’s locks, which can cost between $100 to $300 per door.
  • Household Goods: From a new broom to curtains, these post-move items can add up.
  • Utility Connection Charges: When you move in, you’ll need to put the utilities in your name, and this often comes with connection fees.
  • Redecorating and Renovation Costs: Getting the home to your liking could involve significant costs, especially if renovations are in order.
  • Immediate Repair and Maintenance Costs: Even if the home was in perfect shape, certain parts may require immediate attention once you start using them.

Navigating the costs of home buying is no small feat. By preparing for financial aspects, you’ll confidently enjoy your new home without unexpected expenses dampening your excitement.

Remember, home buying should be a thoughtful, strategic process — and knowing what you’re getting into financially is a crucial part of the equation. Create a comprehensive budget that includes all these cost factors and be sure to discuss any uncertainties with your real estate and financial advisors.

In the end, the story of home ownership should be one of new beginnings, not financial strain. By having the foresight to consider these costs, you’re already on your way to making a sound, informed investment in a place you can truly call your own. Happy house hunting!

Discover Your Personal Mortgage Payments Today!

Ready to take control of your finances? Don’t just wonder what your mortgage payments might look like, find out today with my easy-to-use Mortgage Calculator! Devise a budget that truly works for you by understanding your potential mortgage costs. Click here to take the first step towards better budgeting.