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8 Hidden Costs Every Home Buyer Should Know

Posted by Will Murray on Thu, Mar 5, 2015

8-hidden-costs-every-home-buyer-should-knowBefore buying your new home, you should be aware of potential hidden costs, on top of the cost of your new home, which should be factored into your financial calculations. One thing to keep in mind: these fees are approximate and most that will be listed are based on the average cost of a home in Edmonton in 2014, being $432,000, provided by research conducted by the Realtors Association of Edmonton. Sorry for the legal-ese!

Property Taxes 

($3,299.15 per annum)

The Realtors Association of Edmonton says that the average cost of a home in 2014 was $432,000. Based on this price, property taxes would be $3,299.15 per year, or 274.93 per month (excluding potential increases in municipal and provincial education tax increases). Typically, one pays their property taxes once per year in June, however, one can also apply to be enrolled in the monthly payment plan

If you would like specific numbers on your property tax, and know the approximate price of your new home, you can follow this link to find out how much per year you would have to pay.

Home Insurance

($915.00 per annum)

This is a hard one to give you an estimate on because home insurance is extremely particular to the kind of home you have, down to your choice of flooring and furnishings. They take into account building materials, house size, lot size, the year your home was built, price, roof shape, and several other things. It also depends on what you want to be covered for. Some companies may choose not to cover certain things, like flood damage for example. So it's important to figure out what kind of coverage is right for you based on where and how you live. 

Many companies will also give you a discounted rate when you purchase more insurance with them, such as auto insurance, and therefore you’d pay a ‘package’ price. Regardless, many insurance companies will let you fill out the specifics online and give you a quote. Some companies offer free quotes online, like AMA. 

With that all being said, an average price per annum, that isn’t unusual for a two-story single family home, would be around $915. (Based on research by Canadian company InsurEye).

Closing Costs

Appraisal Fee

Your bank will sometimes hire an independent appraiser to determine the value of the property and whether it meets its lending criteria. This may or may not be required depending on the type of property being purchased. Talk to your bank to find out if this is applicable to you. 

Lawyer/Legal Fees 

($1,500)

You will be required to retain a lawyer or notary to act for you in the purchase and mortgaging of your property, and you will also be responsible for payment of all related fees and disbursements. Fees for these services may vary significantly, so you may wish to shop around before making your decision. However, it is typical in Alberta to pay at least $1,500 for legal fees, disbursements, and title insurance.

Realtor Commissions 

(Optional) $15,000

This varies amongst agencies/agents, and may not necessarily be applicable. Many people choose to purchase without realtors, which can be done and will save you some cash. It’s not untypical for realtors to charge 7% commission for the first $100,000, and a rate around 2.5% for the balance. Given the average house price in Edmonton of $432,000, this would work out to being around $15,300. 

Land Transfer Tax (Title Transfer Fees)

($136.00)

Most provinces levy a one-time tax (sometimes called the "Welcome Tax") based on a percentage of the purchase price of the property. Fortunately, Albertan homebuyers pay a relatively small land transfer tax in comparison to other provinces. There’s a $50 base fee, plus an additional $1 per every $5000 of your housing cost.

Mortgage Life Insurance

(Optional...depending)

This isn’t necessary but it is definitely something to consider. This insurance take care of your mortgage, in the case you suddenly… shuffle off this mortal coil, so that your family doesn’t have to. This is also dependant on what company your mortgage is through. Some companies require this as part of the mortgage approval.

Utilities 

($2,100 per annum)

Gas/Electricity

Your home in Alberta will probably be heated by a gas powered furnace, which blows hot air through vents circulating throughout the house. Alberta’s cold winters mean that winter bills are significantly higher than summer bills. For a standard single family home you can expect total monthly electrical and gas bills ranging from $280 – $350 per month in the coldest months, to $100 -$200 in the summer months.

Water/Sewer

Typically, allow $70 – $110 a month depending on how much water you and your family actually uses. This cost is added to either your power or water bill, depending on who you use.

8-hidden-costs-every-home-buyer-should-know-movingMoving Costs

(depends on the company and times)

Moving can be done three ways: using a truck - either yours or a friend, renting a Uhaul truck, or hiring movers. The latter option is, of course, the most expensive. A lot of people will rent their own Uhaul and move with the help of friends, which saves you quite a bit of money. But if you believe time is money, then it may be best to go with some professional movers. The price of course depends on the movers, how far you’re moving, and how much you have, but for a one day move within the city, you’re looking at around a minimum price of $1,000. 

Furniture Upgrades

This is important to keep in mind. I’m not going to quote a price, but if you’re moving into your new home, and you want new furniture to compliment the new feel, you may be looking at quite a bit of money. A nice new living room furniture set alone is around $3,000 to start. Appliances etc. in addition would put you well beyond that. We feel the key is to change your furniture over time. 

Landscaping/Fencing

From putting in grass, or a rock bed, landscaping costs vary greatly depending upon the company you choose and the amount of work/quality of the work you want done. In new areas, there are certain conditions you'll need to meet like aa specific number of trees or other items. Plus, you usually have a time limit on when your landscaping needs to be completed by (which does take the seasons into account!). Many people will leave this until later, when they’ve finally managed to come to terms with the other hidden costs, but some may want to get it done and out of the way immediately. In the end it’s all up to you! 

Upgrades (Pre-owned Home)

If you’re purchasing a new home there won’t be a need to upgrade the new materials. However, if you’re purchasing a pre-owned home, you ought to take into account upgrades of all kinds. There could be some structural issues (which would be covered in your home inspection), maybe you want a larger hot water tank, or simply get rid of the outdated wall coverings. Whatever needs to be done, you need to account for it in your finance sheet! 

Whew! Looks like a lot, doesn't it? Here's the thing - it's not all going to need to be paid at the same time. Things like the mortgage life insurance are built into your monthly costs, and same goes for your utilities. And you may not have to worry about any landscaping or fencing. But if you know about these hidden costs, and are prepared for them, it doesn't feel like such a big hit to the bank account balance.

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Topics: buy a home, buy a new home, mortgage and financial

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