Review this checklist so the home you buy doesn’t break the bank.
Consider these 8 home-related expenses:
Home inspection fee: Before closing, it’s customary for the buyer to hire a home inspector to confirm the home meets building standards and is “up to code” for that city. The inspection cost is based on the size and complexity of the home’s systems, but on average the fee should be between $375 and $500, according to our BMO Home Buyer’s Guide. You are responsible for paying this to the inspector. It’s a good idea to make your offer conditional, based on a successful home inspection. Sure, the house might look beautiful, but your inspector may detect structural or other problems that you can then negotiate with the seller to either fix or deduct the repair cost from the agreed-upon price.
Appraisal fee: Your mortgage lender will require an appraisal (for example, the current market value of the home) before they’ll finalize your loan. Appraisals generally cost between $250 and $500, according to the Canadian Mortgage and Housing Corporation (CMHC), and you may have the option to roll it into your closing costs.
Utility bills: Unlike renters — who may have utilities built into their monthly rent payment — homeowners are responsible for all bills, such as water, gas, electric, home phone, cable and Internet. And this can add up faster than you may think. For example, keeping a home warm in the winter and cool in the summer can be pricey, depending on where you live. In fact, heating accounts for a significant part of the total expenses of Canadian households, according to Statistics Canada. Its Survey of Household Spending found Canadians spend an average of $1,895 on electricity, natural gas and other heating and cooking fuel a year. Need help planning? Use Natural Resources Canada’s home energy calculator to estimate how alternative energy sources and energy system replacements could potentially affect your energy bills.
If we compare the expense of an inspection to the cost of buying a home, it really isn’t that expensive after all! But too often, we still skip this step.
“You would never purchase a used car without hiring a knowledgeable mechanic to inspect it first. So why wouldn’t you do the same thing before making one of the most important investments of our life?” asks Jean-Claude Fillion, an architect who specializes in pre-purchase inspections.
“It’s important to know where you stand before buying a home,” he continues.
Before you sign on the dotted line, here are five good reasons to get a home inspection before you buy a house. Continue reading →
“The faster you pay off a mortgage, the more you save in interest,” says Louis-François Éthier, product manager at National Bank.
The truth is, paying off a $100,000 mortgage in a short period of time is extremely difficult without both a sizable and stable income, and relatively few expenses. A small regular payment stretched out over a longer amortization period (the total time required to pay off the mortgage) is usually considered an expensive strategy. This is because mortgage payments mostly cover interest and little of the principal until the interest is paid, so it can take decades to pay off the balance.
“The amount of your mortgage payments should be based on your overall budget,” says Louis-François Éthier.
How much of your budget should go toward mortgage payments?
Most financial institutions recommend that no more than 30% of your total budget go towards mortgage payments, municipal taxes, and heating. “It’s the classic ratio in the industry: mortgage to total debt,” says Mr. Éthier. “It’s crucial to also consider other debts, such as car loans and balances on credit cards. Mortgage counsellors can help you make the right choice.”
Of course, the expected time if would take to pay off the mortgage directly influences the amount that we spend on our regular payments. Continue reading →
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