Useful list of expenses when buying a home

Buying or selling a home comes at a cost. To avoid getting caught off guard, here’s a list of expenses you should include in your “new home” budget.

Buying: What are the one-time costs?

Set aside the equivalent of 3% to 5% of your property value for these inevitable costs:

• land transfer tax (commonly referred to as the welcome tax in Quebec)
• notary or lawyer fees
• adjustment of municipal and school taxes
• mortgage insurance premium¹
• professional services such as a home inspection and appraisal
• moving expenses
• standard service connection fees (electricity, gas, telecommunications, etc.)

Sometimes, little expenses here and there can add up. In particular, keep in mind the cost of:

• purchasing new furniture and/or household appliances
• small odd jobs and slightly more substantial renovations
• interior decorating: blinds, curtains, lighting, carpet cleaning, painting, etc.
• outdoor renovations: installing a fence, landscaping, adding a pool, etc.

Building your own home? Your one-time costs will go up as you’ll also be paying for:

• the preparation of plans and specifications
• a building permit
• surveying
• landscaping
• sales taxes
• possibly water and/or soil analysis

Recurring costs: Up to 32% of your gross income

Once you’re settled in, you’re still not off the hook. It’s recommended that you set aside up to 32% of your gross income on annually-recurring fixed costs. These typically include:

• your mortgage loan payment
• standard service fees (electricity, gas, telecommunications, etc.)
• home insurance, life and disability loan insurance
• municipal and school taxes
• condo fees, if you live in a condo
• RRSP repayment if you participated in the HBP

Selling: The most common expenses

Few people realize that it’s just as important to budget for the following expenses when selling your home, especially if you’re also buying a new property:

• paying your mortgage balance (this one goes without saying), but it’s possible you’ll also be charged a prepayment penalty if you pay your loan in full before the end of your contract. Assess this amount properly with your financial institution before deciding whether to sell.

• updating your certificate of location, a document that’s required for notarized transactions
• taxable brokerage fees (the percentage specified in your contract with your real estate agent)
• repairs, tests or analyses that the sale of your property is conditional on
• a release fee, allowing you to register your mortgage discharge with the land registry
• municipal and school tax adjustment
• moving expenses

Don’t hesitate to ask your financial advisor or real estate broker for their valuable advice-they’re your allies.

¹ If you have a down payment of between 5% and 20% to purchase your home, you’ll have to take out mortgage insurance from Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial Canada. You’ll have the option of paying it off as a single lump sum or adding it to your mortgage amount and amortizing the payment.