What property types should you consider when buying a home? Here are some key factors to understand when making your decision!
When buying a home, the big costs we automatically think about are the down payment, and the mortgage. While these are the major expenses, there are several other costs home buyers should be saving for. It’s important to be prepared for these extra fees so they don’t come as a complete shock later. Here are some additional items you will need to pay for during the home buying process!
A home inspection is not an official requirement, but home buyers should treat it as one. This is a process where a professional visits the home and looks for any potential health or safety concerns, or other issues that can cause expensive repairs. This includes electrical, roofing, plumbing, or foundational problems, for example. If an inspection reveals an issue that will require major repairs, the potential home buyer can choose to walk away from the sale and avoid those financial responsibilities. The seller may also be willing to cover some or all of the repair costs if the buyer is still interested in the property. A home inspection often costs a few hundred dollars, but saves a lot of money down the road.
Unlike an inspection, a home appraisal determines the property’s market value. An appraiser examines the location, age, and condition of the home in comparison to similar properties nearby, as opposed to issues specific to the property. Many lenders require an appraisal before they grant mortgage financing, so they can decide whether they are willing to finance the property. This means your home appraisal must be equal to the sale price of the purchase. Otherwise, your lender is likely not going to be willing to finance the entire mortgage if it costs more than the property’s true value. You can read more about what you can do in this situation here. This process also costs a few hundred dollars in most cases.
Land transfer tax
This is a fee paid on closing day, and it is a tax that covers the change in ownership. It depends on the home’s purchase price and municipality. In Halifax, for example, the land transfer tax is 1.5 per cent of a home’s purchase price. The good news for first-time home buyers is they can receive a tax credit for this cost, and receive a refund from the government. For repeat home buyers, make sure you are prepared to cover this fee!
Home buyers must use a lawyer to review legal files and prepare mortgage documents. Lawyers are an essential part of verifying costs and drafting title deeds. Their prices can vary, but they often cost close to one thousand dollars. This expense is due upon closing, when the sale officially goes through. This is one of the biggest costs you will face upon closing.
Property taxes are annual expenses you will need to pay once you take possession of your new property. These taxes help pay for public services such as education, construction, and fire response teams. The amount you pay is determined by the value of your property. In Halifax, the average property tax rate was 1.08 per cent in 2022. This is a repeated expense you must prepare for each year.
Finally, you need to think about the expenses associated with moving everything from one location to another! Most home owners choose to hire a moving company for this task, because it is a huge job that requires a lot of organization (and strength!). The costs of these companies can really range, depending on how many items you have and how far the journey is, but in most cases it is worth it. If you have a set of strong friends and family who are willing to help out instead, make sure you at least pay for a pizza break!
The additional costs associated with buying a home add up quickly. In total, many people estimate that closing costs equal about 1.5 per cent of a home’s purchase price. This is a relatively small percentage, but it’s still certainly a significant expense! It’s important to consider these costs ahead of time, so you aren’t surprised when they pop up down the line. Be sure to start saving early!
If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.