Buying your first home can be a thrilling experience—full of excitement, anticipation, and a sense of accomplishment. After months of searching for the perfect property, crunching numbers, and making careful calculations, you’re finally ready to become a homeowner! But before you start furniture shopping and packing up your belongings, you must know the hidden costs of owning a property. Unfortunately, first-time buyers often overlook these costs, and failing to consider them can lead to financial stress and unexpected expenses down the line.
To help, we’ve compiled a helpful list of hidden costs that you need to be aware of before making your purchase:
A necessary expense to consider is the deposit. You’ll need to pay this sum upfront to secure the property and show your commitment to the purchase. The deposit can range from 5% to 20% of the property’s value, depending on the lender’s requirements and the type of mortgage you’re applying for.
You must also factor in appraisal fees and the deposit. An appraisal is a process that determines the value of the property you’re buying, and it’s required by the lender to ensure that the loan amount is not higher than the property’s actual value. The appraisal fee can range from a few hundred dollars to over a thousand, depending on the property’s value.
One of the most critical steps before purchasing a home is to get a home inspection done. This process involves hiring a professional to thoroughly inspect the property and assess its condition, identify potential issues, and provide you with a report. The home inspection fee can vary depending on the size and location of the property, but it’s an essential expense that shouldn’t be overlooked.
Another cost that is often overlooked is the land survey fee. This expense involves hiring a professional to survey the property’s boundaries and ensure that there are no encroachments or boundary disputes. The land survey fee can vary depending on the property’s size and location, but it’s an important expense to consider, especially if you’re buying a rural property.
Legal fees are another expense you must consider when buying a property. These fees involve hiring a lawyer to handle the legal aspects of the purchase, such as preparing and reviewing the purchase agreement, registering the property in your name, and ensuring that all legal requirements are met. Legal fees can vary depending on the lawyer’s hourly rate and the complexity of the transaction.
When buying a property, you’ll also need to pay a land transfer tax, which is a tax levied by the government on the transfer of land ownership. This tax can vary depending on the property’s location and value, and it’s an essential expense to factor into your budget.
Mortgage default insurance is required by law if you’re putting less than a 20% down payment on the property. This insurance protects the lender if you default on the mortgage, and the cost is based on a percentage of the loan amount.
Another type of insurance you’ll need to consider is mortgage life insurance. This insurance protects your family in case you pass away before paying off your mortgage, and the cost is based on your age and the amount of coverage you need.
Title insurance protects you against any issues with the title of your property, such as liens or ownership disputes. The cost of title insurance varies depending on the value of the property.
Home Insurance: Home insurance is necessary to protect your property against damage, theft, and other potential hazards. The cost of home insurance will depend on the property’s value, location, and level of coverage you choose.
Once you’ve moved into your new home, you must pay utilities and property taxes. These costs can vary depending on the size and location of your property, especially if you live in a large home with high energy consumption or an area with extreme weather conditions.
Last but not least, moving can be a significant expense, especially if you’re moving long distances. Be sure to budget for costs such as packing supplies, movers, and transportation.
Check out our previous blog post Enhance Your Financial Literacy with These Simple Tips. In addition, if you need personalized financial advice, our team is always here to help—contact us today to book an appointment!