Forgotten expenses: they can come as a nasty surprise to a homebuyer. Here are five common ones that first-time buyers may not have thought about and can add up to a chunk of change.
Land transfer tax
Paid to the Province of Ontario, this tax is based on the purchase price and due on closing.
If you buy a home in Ottawa for $550,000, you should expect to pay about $7,475 in land transfer tax. There is a rebate of up to $4,000 for first-time buyers; that means a first-time buyer purchasing a home for $550,000 winds up paying a land transfer tax of $3,475.
For more information, see the related Government of Ontario website.
PST on mortgage insurance premiums
If you’re making a down payment of less than 20 per cent, you need to purchase mortgage default insurance through an organization such as Canada Mortgage and Housing Corporation (CMHC) or Genworth Canada. However, there is provincial sales tax (PST) on the premium, and it’s payable up front for the full amortization period.
If you buy a home for $600,000 with a 10-per-cent down payment, your default insurance with CMHC will cost $1. The PST on that is $714.
To calculate your own cost, visit ratehub.ca
Insurance
“Standard home insurance is pretty cheap relative to many other types of insurance, but budget that into your calculations,” says Jenna Roundell of RBC Dominion Securities. Ontario homeowners pay an average of about $1,400 a year, although rates vary depending on location, type of house and other factors. Many homeowners have a monthly payment plan, which makes budgeting easier.
However, Roundell continues, what about life, disability and critical illness insurance? “Buying a home is a big event and it usually coincides with a growing family – either a spouse or a new child or even the addition of a granny suite.” She says to make sure your family is protected if you can’t continue paying the mortgage because of illness or even death.
There’s one caveat to this, Roundell continues. “With only a couple of exceptions, it’s almost always better to insure privately rather than opting for mortgage insurance through your lender.” She recommends talking to a certified financial planner to help determine what, if any, insurance you need.
Maintenance costs
Unless you’ve bought a new home, count on spending money every year for maintenance and repairs. That includes everything from the unpleasant surprise of having to fix a leaky roof to painting the family room.
While estimates of average maintenance and repair costs vary, many experts say to budget one per cent of the purchase price of your home. So, if you paid $500,000, you should try to sock away $5,000 in a savings account to cover these expenses.
When it comes to repair and maintenance tools, Nick Bachusky, a mortgage agent with mortgageinottawa.com, suggests cutting your costs. “Look at using great services like the Ottawa Tool Library, where you can just pay an annual fee and use it like a book library.”
Moving day
The cost of hiring a moving company can depend on how much you’re moving, how far and even the time of year. However, you should count on at least $1,000, and it could be a good deal more.
Planning on doing the move yourself? Don’t forget the cost of renting the vehicle, including gas plus pizza and beer for the small army of friends and family you’ll need to help you.
Originally published Oct. 17, 2017
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