Estimating the Expenses Involved in Home Purchase

Estimating the Expenses Involved in Home Purchase

How Much Will it Cost to Buy a House?

Purchasing a home involves a significant investment, often representing the most substantial financial commitment individuals undertake. Therefore, it's crucial to carefully evaluate the expenses involved to mitigate the potential for future financial strain.

Given the substantial impact on your finances, it's prudent to explore into the various expenses associated with home buying. Conducting thorough research and understanding the typical costs of these services in your area will empower you to select a property aligned with your financial means.

Deposit: In certain regions and depending on the home's price, you might be required to place a deposit on the property as a safeguard against losing it to another potential buyer. Should a deposit be necessary, it typically transitions into part of your down payment upon finalizing the home purchase.

Down Payment: Homebuyers typically need to provide a minimum down payment of 5% of the home's purchase price. While this percentage is feasible for many first-time buyers, aiming for a down payment of 20% or more is advantageous as it allows buyers to sidestep the need for Mortgage Loan Insurance.

Land Transfer Tax: When purchasing a home, buyers are obligated to pay a land transfer tax to the province upon closing. This tax is typically calculated based on the purchase price of the property and any outstanding mortgage or debt associated with the land acquisition. The exact cost varies depending on factors such as the municipality, the size of the property, and other considerations.

Appraisal Fee: Typically, an appraisal ranges between $200 and $300, although costs may vary based on your location. This fee serves to ensure you borrow an appropriate amount and prevents lenders from overextending credit to you.

Home Inspection: A home inspection is an essential part of the home buying process, typically costing around $350 on average. However, this figure may vary based on factors such as the size, age, and condition of the home. Investing in a home inspection helps uncover any potential maintenance or improvement costs, ensuring a more informed purchase decision.

Property Insurance: While property insurance is likely already accounted for in your budget, it's crucial to conduct thorough research to secure a reasonable quote. This ensures that you are adequately covered in the event of any unexpected occurrences.

Mortgage Insurance: Mortgage life insurance is tailored to safeguard the repayment of a mortgage in case of unforeseen events affecting you. Additionally, there is mortgage loan insurance available if your down payment constitutes less than 20% of the total house cost. Premiums for this insurance category typically range from 0.5% to 3%, with higher rates for self-employed individuals.

Lawyer Fees: The fee charged by your lawyer will vary based on the individual representing you and is typically due upon closing. Your real estate agent can offer recommendations as they often have trusted lawyers they can refer you to.

Title Insurance: Title insurance is a single, one-time fee that offers protection against losses associated with the property's title or ownership. To gain deeper insights into what it entails, consider reading our detailed blog post on the subject.

Property Taxes: Property taxes are typically calculated as a dollar rate for every $1,000 of the estimated market value of your property.

Maintenance and Energy Costs: Potentially your most significant ongoing homeowner expense, these costs encompass lawn care/yard work, professional services, additions/upgrades, and the expenses associated with maintaining the house year-round. You can utilize our monthly home budget planner to effectively map out all of these expenditures.

Moving Expenses: It’s easy to overlook the small details when moving, but it’s crucial to remember that they can accumulate rapidly! Factor in the expenses for phone, electricity, and other utility installations, and don’t overlook costs such as movers, a moving truck, and providing refreshments for friends who are assisting you!

Commission rates: In Manitoba, real estate commissions usually fall between 4-5% of the property's sale price. This amount is divided equally between the buyer and seller agents, with each receiving 2.5% if the total commission rate is 5%. 

Get in touch with the Ed Dale team and book your free consultation!