Whether you are considering buying your first home or upgrading to a larger one, there are several expenses in addition to the selling price that you need to plan for when you start your search. These additional costs can take you by surprise. In order not to turn the signing at the notary’s office into a nightmare, it is important to be well prepared.
Some of these costs are one-time payments and others are monthly or annual commitments in addition to what you had planned. Not all of these costs apply in all situations, but it is best to be aware of all of them in order to establish a realistic and complete budget.
Remember, buying a home is a central part of your financial picture. It is therefore essential to plan for these expenses.
Read the following list of items carefully and make sure you have budgeted for your next purchase.
1. Assessment fees
Generally, the lending institution will request an appraisal of the property you are interested in and you will be charged for it.
2. Property taxes
Depending on the amount of cash you give, the lending institution may decide to add the property tax payment (municipal and school taxes) to your mortgage payment. In fact, even if you pay them back to the current owner in the adjustments at the notary’s office, you will have to start paying them immediately with your mortgage payment in order to build up a reserve for the next payment.
3. Property insurance
Home insurance covers the reconstruction of the building (replacement value) in case of destruction and insures the contents (fire and theft). Your lending institution will require proof of insurance before releasing the funds for signing at the notary.
4. Legal fees
Even the simplest transaction must be duly signed at a notary’s office and registered at the Bureau de la Publicité des Droits Immobiliers. Ask about the fees charged by different notaries. The costs will vary according to the complexity of the file and the services offered by the notary.
5. Mortgage insurance costs
If you do not have the minimum cash percentage required to obtain a “conventional” loan from your bank, you will have to pay an insurance premium for it. This represents between 0.5 and 3.5% of the total mortgage amount. Payments are usually added to your monthly payment.
6. Mortgage brokerage fees
A mortgage broker has the right to charge a fee for canvassing different lending institutions. However, it is important to “store around” because many brokers will give you their services for free since the lending institution will pay their fees.
7. Moving expenses
Professional moving companies’ fees average $80 to $125 per hour for the truck and 3 men. Prices increase by 10 to 20% during the July 1st period. Please note that if you are moving more than 40 km from your workplace, it may be a good choice for you.
8. Condo fees
Co-owners must pay monthly fees for the maintenance of common areas, stairs, landscaping, snow removal, etc. These fees vary according to the type of building and the decisions of each Syndicate of Co-ownership.
9. Infrastructure
It is important to find out if a special tax for exceptional infrastructure expenses (sidewalks, water, sewers, paving) applies to the property you are interested in. These infrastructure expenses can represent thousands of dollars that are added to the municipal tax bill for a predetermined number of years.
10. Transfer and other taxes
This tax is applied uniformly in all municipalities on the transfer of title to a property. It is commonly referred to as the “welcome tax” and must be paid within 30 days of receipt of the invoice. In some municipalities and under certain circumstances, a “green tax” may apply in the case of a major expansion requiring a new cadastre.
Now that you know how much you need to spend in your search for a new home, you won’t have any nasty surprises. You will be able to make a better choice in your search while respecting your budget.
Don’t forget that we are always ready to accompany you in your search.