The Costs Involved in Buying Property
The Hart Costs of Buying Property
With all-time low interest rates, owning your own home can make more sense than renting. But not everyone’s financial situation is the same. When looking at the prospect of buying property, buyers should know the costs that lay ahead.
In Canada, many homebuyers are still unsure if buying a home is the right decision. And there are more things to consider than the price of the property. Your monthly budget is a major factor to consider. This will tell you what you can afford for financing. Not only that, it will help to ensure that you have all of the necessary costs accounted for.
In order to properly budget for buying property, you should consider the costs. It is always good to round up when budgeting, too. If you can afford the rounded up price point, you will take into account any miscalculations there may be.
Budgeting for Buying Property
The costs that should be included in your budget are:
- Deposit – This is the amount you put down.
- Legal Fees – In some cases, your lawyer will facilitate everything. Legal fees can very, so keep this in mind when determining the price of buying property. Still, this will make the process more secure.
- Home Inspection – A home inspection is absolutely recommended. It is an up-front cost that could save you thousands of dollars.
- Appraisal Fees – It is important to have your potential home purchase appraised first. It is a small, but important, up-front fee.
- Land Transfer Tax/Fees – You might be required to pay a percentage of the home purchase price. This happens when the title of the property is transferred to you. The fees can vary from province to province.
- Property Taxes – Your lawyer will make sure that the property taxes are up to date. If they aren’t, the seller is responsible for paying them.
- Registration Fee – This is due to the Provincial Government for registering the title and mortgage.
- Mortgage Insurance – This depends on the amount that you borrow. You can avoid this with a 25 percent or more down payment.
- House and Content Insurance – This amount is dependent on what it would cost to replace the home and its contents. The bigger the house, the larger the premiums.
- Moving Costs – Last but not least is moving expenses. They can add up quickly, so take all of your scenarios and details into account.
Approval for Buying Property Doesn’t Mean You Can Afford it
It is important to know the difference between qualifying for a loan when buying property and being able to afford it. Take your personal lifestyle into account. There is a saying known as “house-poor” where the buyer can only afford the home, not to furnish it.
If your lifestyle includes dining out, entertainment, traveling, adventure sports, or other leisure activities, consider that when deciding on your mortgage. You may qualify for a larger amount, but consider what your monthly budget will look like.
The key here is that you want to be able to enjoy your life. While buying property is important, it can’t be properly enjoyed if there is no money for anything else. Know your budget before looking for an approval so you know what you can afford.
Lenders will often approve financing for a larger amount than what you can actually afford. They do this to remain competitive in low-interest markets. Don’t commit to that higher financing without knowing if you can afford it.
When applying for a pre-approved mortgage with Super Brokers, we will help you understand your true financial capabilities. We will help to assess your income, finances, and mortgage needs to ensure that “house-poor” is something you won’t have to deal with.
If you are curious whether or not you can afford a home, sit down and assess your budget. This will provide the answer as to whether buying property is possible for you. Create your budget with all of the aforementioned fees and costs associated and you will know what you can spend each month. This is the true indicator of what you can afford in a mortgage.
Calculating the Costs
Though it was touched on briefly, it is important to gauge your costs. It will never be down to the penny because things change. But you can be generous when calculating costs. This will give you a safe estimate on your costs; coming in under that money is only a bonus.
On the other side of that coin, always be conservative with your income. Generally speaking, your income is what it is. And while there may be opportunities for overtime and bonuses, treating that money as a guarantee is the quickest path to trouble.
This method of thinking allows you to know absolutely what you can afford and what you will be bringing in. And that is how you truly budget for the costs of buying property.
Get Professional Advice
If there is any uncertainty about what you can afford on a mortgage, use our secure online application. Super Brokers mortgage brokers work through the process with you. Our team will work to find the best possible mortgage under your budgetary needs.
Super Brokers offers an experienced, guiding hand that will help make the process easier than ever. It will also ensure that you come in at your budgetary needs, providing confidence during the process of buying property.