Keeping it real – the monthly costs of homeownership

From personal observation, I’m happy to report that today’s homebuyer may be better informed than at any other time in history. Between easy-to-access information on the internet, help provided by mortgage brokers and lending institutions and – perhaps most significantly – the abundance of real estate reality shows, most homebuyers are entering the market with fairly realistic expectations. That’s terrific, because there’s nothing I hate more than bursting a client’s bubble.

I’ve found, however, that one consideration often put on the back burner is the monthly costs associated with owning a home.

Most of my clients walk through my door with a figure in mind, representing the price they’re willing to pay for the right home.

The crucial question: How have they arrived at this figure? Ideally, they’ve used a mortgage calculator that enables users to experiment with different scenarios. A wide variety of mortgage calculators can be accessed online. I encourage you to choose one that takes monthly expenses (in addition to your mortgage payments) into account. These typically include the following:

Property taxes

This is one expense that can really take first-time homebuyers by surprise – particularly if that first home happens to be located in a major urban centre. The cost can vary an incredible amount depending on your municipality, so background research is definitely helpful.

Utilities

While just about everyone expects to pay for heating and electricity, it’s wise to consider the size of a home and its method of heating. The good news is that most new homes are built to be impressively energy efficient.

Condo fees (if applicable)

These depend greatly on a building’s amenities and on a suite’s square footage; they may include utilities. Be sure to ask how long the current fees will apply, as they may be raised each year.
Some additional expenses generally not included by mortgage calculators include the following:

Home insurance

To carry a mortgage in Ontario, your home must be insured. New homes tend to be less expensive to insure than older homes.

Decorating

While new homes don’t require expensive overhauls, it’s a good idea to budget for paint, wallpaper, window treatments and furniture that suits your new home. Happily, this is the one expense that will lessen after the first year.

Final words: Don’t be afraid to crunch the numbers. There’s nothing scary about being prepared!

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