Closing and Other Costs for First Time Home Buyers
So you are paying the rent and living with a roommate. You and your partner have almost saved up enough money for a 5% down payment on a house. Your mortgage broker / bank says you need to prove you have a further “1.0%-1.5% for closing costs" – what the heck??? On a $300K purchase, that could be a further $4500! Where does that money go?
As first-time home buyers, here’s where the extra costs might crop up and why the rules say 5% is not enough…
- There might be $400 for a home inspection to help uncover any structural and mechanical problems with the property before you purchase.
- A property value appraisal may be required by the bank at $300+
- $1,300+ for the lawyer to transfer the property title to you and record the mortgage on title
- Property tax adjustment perhaps $1500 (if the seller pre-paid property taxes, you have to pay them back as much as 6 months' worth)
- Some provinces have land-transfer taxes well into the thousands (~1% or more)
- Property repairs required on move-in?
- Utility connections prior to move-in (security deposits for first-timers)
- Moving costs – consider renting a U-Haul and getting some friends to pitch in.
- Any new furnishings or decorations.
- Maintenance and repair emergency fund - things like the hot water tank or furnace may need replacing unexpectedly (set aside $100/mo in a special account)
- House insurance - $100/month. You don’t want to owe a quarter of a million dollars on a pile of ash after a house fire!
Check out our Homebuying Step-by-Step Guide for more information. Learn more at Can You Get a Mortgage, or click for a free mortgage pre-assessment/ consultation.