What No One Tells You About!
So, you’re finally ready to buy a home. Congrats! Homeownership is a huge milestone. But before you start packing your boxes, there’s one important thing you need to do: figure out how much it’s actually going to cost you.
Sure, you know to come up with a down payment and closing costs. But there are also a number of other prepaid expenses that can come as a surprise to first-time homebuyers. We’ll break down some of the most common prepaid expenses and help you get a better understanding of what you can expect to pay when you buy a home.
Homeowners Insurance Premium
Homeowners insurance protects you from financial loss in the event that your home is damaged or destroyed by fire, wind, vandalism, or another covered hazard. Most lenders require borrowers to have homeowners insurance in place before they will close on a loan.
It’s essential to budget for this expense, as it provides protection and peace of mind in case of unforeseen events like natural disasters or accidents. Without proper coverage, you could be left with hefty repair bills that can drain your finances.
Property taxes are levied by local governments and are used to fund public services like schools, roads, and parks.
The amount of property tax you’ll pay at closing will depend on the location of the home, the assessed value of your property, and when you purchase the property.
Mortgage Insurance Premium
If a lender requires you to take out mortgage insurance (MI), then the premium could be included in your prepaid costs. Mortgage insurance is insurance that protects the lender in the event that you default on your loan. Mortgage insurance is typically paid monthly as a part of your mortgage payment.
Inspections And Surveys
Before closing the deal on a house, it’s wise to invest in inspections and surveys. While these may incur additional costs upfront, they can potentially save you from expensive repairs down the line. A thorough inspection can uncover hidden issues like mold or structural damage that may not be apparent at first glance.
Another hidden cost when buying a home is the interest rate on your mortgage loan. Even a slight difference in interest rates can significantly impact your monthly payments over time. It’s crucial to shop around for the best rates and consider factors such as fixed-rate versus adjustable-rate mortgages before making a decision.
Closing costs are another aspect that can sneak up on you. These costs include various expenses such as lawyer fees, appraisal fees, title search fees, land transfer tax, municipal land transfer tax (applicable for properties in Toronto), and more. They typically range from 1.5% to 4% of the total purchase price of the home.
In addition to the purchase price of your new home, there are several other costs that you need to consider. These include:
- Utility bills: Don’t forget about monthly utility bills such as electricity, water, and gas.
- Fees: There may be various fees associated with buying a home, including legal fees, appraisal fees, and closing costs.
- Emergency fund: It’s crucial to have an emergency fund set aside for any unexpected repairs or emergencies that may arise.
There are a lot of things to factor in when you’re buying a home. It’s not just the list price that you need to be aware of, but also the additional expenses. Homeowners insurance, mortgage insurance, property taxes, closing costs, emergency repair costs besides other fees and expenses can all add up. Be sure to factor in these costs when you’re budgeting for your new home so that you don’t end up being surprised down the road.
Looking to buy a house? Let Ragona Sisters help you find a home that matches your style and budget! Call us at 647-691-7778 and let’s get started.