When it comes to purchasing a home, most prospective buyers focus on two main costs: the monthly mortgage and the cost of the down payment. While there’s no denying that these are the two most significant payments, it’s also imperative to account for what else is to come.
Without knowing exactly what’s around the corner, you’re going to be putting yourself in an unsafe position financially. Before signing on the dotted line, it’s crucial to understand the often forgotten costs of home ownership. To help, we’re uncovering the five most critical and forgotten costs of home ownership.
Ah, yes, property tax!
While a home might look affordable in it’s purchase price, it’s crucial to take note of it’s property tax amount. This is an unavoidable tax that all property owners must pay on a routine basis. Some homeowners pay these taxes monthly in addition to their mortgage and others pay these taxes annually. Fortunately, a home’s property tax is documented on the property listing. This makes it easier to plan for these costs in advance and factor them into your budget.
However, it’s important to note that property taxes can and will change. Just because they were affordable the year that you purchased your home doesn’t mean this will be the case five years from now. In fact, you might even witness a property tax increase the year immediately after you move in. This is just another reality of owning a home and having to budget for unforeseen circumstances.
In addition to paying property taxes, the majority of homeowners will also need to budget for home insurance. While it’s not technically illegal to own a home without homeowners insurance, it’s certainly not common. If you plan to finance your home with a mortgage, you’re going to be required to provide proof of home insurance.
This is a significant cost that is imperative to budget for in advance. Sure, you might be used to paying renter’s insurance on your previous apartment. But, when it comes to insuring an entire home, you’re going to want to budget for a significantly higher cost.
Remember, certain homes are simply more expensive to insure. Was your home built in 1885? If so, you can expect to pay a higher premium. Does your home also happen to be located in a flood zone? Again, you’re going to want to budget for that increased cost.
Land Transfer Tax -Provincial and Municipal
When it comes to home ownership in Ontario, the provincial land transfer tax is often the most forgotten aspect of purchasing a home.
This is a tax that must be paid on closing for every buyer when purchasing a home or condo. This is a fee exclusive to buyers and is never paid by sellers. The cost of this tax is dependent on the purchase price of the home. Of course, the more expensive the home, the more expensive the land transfer tax is going to be.
Residents in Toronto also have to budget for a municipal land transfer tax. This is an inevitable tax that must be paid in addition to the provincial land transfer tax.
Increased Utility Bills
In transitioning from a small-scale apartment to an entire home, it’s safe to say that you’re going to notice a difference in your monthly utility charges. While heating your studio apartment in the winter wasn’t so bad, this isn’t going to be the case for your two-story home.
Short and simple, the cost to run an entire home is exponentially more expensive than a one-bedroom apartment. You might also experience other utility bills that are unique to home ownership such as a garbage and waste bill.
Maintenance and Unforeseen Circumstances
One of the most promising aspects of renting is that you can generally avoid the cost of maintenance. Sure, if a lightbulb burns out you’re likely going to be the one to replace it. But, when the washing machine is on the fritz and needs replacement, it’s time to call your landlord.
In owning your own property, there’s no calling the landlord. When everyday appliances break or the plumbing is clogged, this is coming out of your pocket. Even if your wallet isn’t feeling so cash-heavy in that moment, you’re going to have to find a way to pay.
It’s Officially Time to Budget
If you’re thinking of joining the ranks of home ownership, it’s imperative to consider all of the costs involved in doing so. While you might have a partial down payment saved and can afford a predetermined mortgage, the costs certainly don’t stop there.
Do yourself a favour and be realistic in what you can afford. While there’s no denying the perks of home ownership, living in a home that you’re struggling to afford isn’t fun for anyone.
Visit Nobul.com to find a home that’s right for you.