Unexpected Costs When Buying a Home
Save yourself from an unpleasant surprise...carefully consider all costs when budgeting for your new home.
“We figured out our down payment on our house to the penny but when we went to sign the documents, we were short. Why?”
One of the most difficult things for lawyers representing new purchasers is when we tell them how much money is needed to complete the purchase and there is a look of shock on their face. Every lawyer at one time or another has had a new purchaser burst into tears in his or her office because they don’t have enough money to complete the deal.
New purchasers and even some more experienced purchasers who have not bought a new home for some time are often not aware of a variety of expenses that arise at the time of purchase.
Fees are what your lawyer gets paid for the work he does. Disbursements are amounts which your lawyer pays to others and simply collects back from you. While most people realize there will be some legal fees, many are not aware of the disbursements and other costs that they will need to budget for. For example, let’s take a house purchase for $90,000.00, which is not uncommon in today’s real estate market. While lawyer’s fees might run around $400.00 or more for the purchase and another $350.00 or more for the mortgage, there are a number of other expenses to consider.
First, there is the registration cost collected by the Land Titles Office, which for a purchase and mortgage is $178.00 and is subject to periodic increase. Second, there are searches which must be done to ensure everything is in order. These vary but can easily exceed $50.00. Third, there are often long distance calls, faxes, postage, copies and so on which don’t usually amount to a whole lot in themselves, but need to be considered. Fourth, in Manitoba the Provincial Government collects a tax on all land transactions in the province, except for most farm transactions, called the Land Transfer Tax. This must be paid at the time of registration and, in our example, would be $300.00. Land Transfer Tax is a progressive tax (percentage increases as the value of the property increases.) Land Transfer Tax of a $300,000.00 property is currently $3,650.00
In addition to the foregoing, there are a number of other expenses that often arise. For example, most lenders now require a Surveyor’s Building Location Certificate. This must be done by a licensed Surveyor and varies in cost depending upon how much work they must do, but for an average residential home usually runs around $1,000.00, or more. Sometimes a lender will accept title insurance instead, but that will still cost $300.00 or so. Also, depending upon the time of year and whether the seller has paid their property taxes, there may be money
owing to the seller for the purchaser’s share of taxes for the part of the year the purchaser will be owner of the property. In any event, even if the taxes are adjusted unpaid, the purchaser must budget to pay the taxes when they come due anywhere from June to October, depending upon the municipality.
Finally, there are any number of additional expenses that must be included in the purchaser’s budget. For example, fire insurance, moving costs or deposits on utilities which may be required before service is connected. Also, most lenders charge approval and appraisal fees which are sometimes, but not always, included in the mortgage amount. And, of course, many of these expenses involve G.S.T.
There is quite a bit of information about budgeting for a purchase available online and in brochure form. You can also speak to your realtor or lawyer, or to someone you know who has moved recently to make sure you don’t miss any important budget items.