Understand the hidden costs of homeownership

Even with housing prices at record highs in many cities across Canada, the desire for homeownership is still strong. According to a recent survey by Ratehub.ca, 71 per cent of Canadians who don’t currently own would like to become a homeowner. And that stat is highest among Millennials, with 81 per cent (those who don’t currently own a home) desiring to become first-time buyers.

Canadians are itching to buy soon, too. Twenty-nine per cent who want to purchase a home would like to do so within one year.

But before you put your magazine down and start hitting open houses, Maili Wong, a certified financial planner and first vice-president with CIBC Wood Gundy would like you to fully understand the gravity of your decision. “Buying your first home can be one of the most significant financial decisions of your life,” says Wong. “Like any financial decision, you need to consider the pros and cons before you buy. Assess the upfront costs of buying a home: Property transfer taxes, real estate commissions, insurance, moving expenses and legal fees. Review the ongoing costs of maintaining the home: Mortgage payments, strata fees, utility and maintenance costs.”

The homebuying process can be challenging to navigate, especially for first-time homebuyers. James Laird, co-founder of Ratehub Inc. and president of CanWise Financial, wants you to know about the various closing costs that first-time buyers must factor into their purchase process.

“Closing costs range from one to four per cent of the home price, depending on where the home is located. Land Transfer Tax is the most significant closing cost. For luxury homebuyers, this amounts to more than $100,000 in major Canadian cities.”

Don’t forget the legal fees either. Laird warns: “Buyers can also expect to incur a minimum of $1,500 in legal fees. A lawyer can also help buyers secure Title Insurance, which is usually a lender requirement. Title Insurance protects against losses in the event of a property ownership dispute and costs between $300 - $1,000.”

Remember the home inspection, too. Laird says,

“It’s a non-mandatory, but recommended service that buyers can contract as a condition of their Offer to Purchase. A home inspection is performed before a mortgage closes and helps ensure that the property is fit for purchase. Home inspections cost around $500.”