Buying a home is intimidating. Who has $350,000 to throw around? Not most people I know!
One of the biggest hesitations for first-time home buyers is the unknown: How do I even get a mortgage? What does it ACTUALLY cost? Am I going to be broke in a year because I bought too soon? What do you mean there’s more costs than the price tag of the house itself?!
Seriously, I feel you.
Why does it seem like the list is never ending? Well, I’ve got news. The list ends. Kind of. As long as you have your spending habits in check. We all know someone who can’t stop browsing the home decor stores.
When it comes to buying a first home, there are some major costs you have to expect. And they don’t all end once you’ve bought the home.
We’ve put together a comprehensive list of the costs associated with buying your first home, so there are no surprises.
Please note this is focused on buying in Ottawa and all costs are a rough estimate. Your costs could be greater, or sometimes lesser, so it's important to consult a mortgage broker, your bank, and/or a financial advisor before making any major decisions or saving plans.
BEFORE YOUR OFFER
Honestly, there are no real costs to you when looking to buy. The good news here is most of the home buying system is free: you can sit down with your bank for free, consult with a mortgage broker, even get pre-approved all at no cost.
Want to browse with a real estate to expand your options and get a professional perspective? Also free!
BEFORE YOUR OFFER IS FIRM
House inspection: $350-500
Well and Septic inspection: $400-600 (each for rural properties)
Status Certificate: $100
Deposit: $5,000 to $10,000 immediately
If you’ve submitted an offer with the condition of a home inspection and the offer is 'conditionally' accepted, this is when that would happen. The offer is considered conditional until all your conditions are met (like a successful home inspection).
A home inspection in Ottawa or Ontario will typically cost you around $450. A home inspection is by no means mandatory, but often a preferred condition to guarantee you’re not buying a lemon of a house. If you're buying a rural property it's good practice to ALSO get the septic and well inspected before your offer goes firm.
Want to skip the home inspection but still nervous about the state of your future home? Shoot me a text or call at 613-790-7679 and we can chat options.
If you're buying a condo, it's good to request a status certificate from the condo corporation. This is information on the condo includes pages that address general information; financial and insurance information; legal information; and rules, bylaws, and regulations. This is good to review before buying into a condo. Your lawyer will review this for you and will let you know if there are any red flags.
If your offer is accepted conditionally, you will still need to put a deposit down. If the offer falls through, you will have your deposit returned to you.
Your deposit is a portion of your down payment, so don’t worry, it’s not EXTRA fees. It’s just a portion of your down payment that is due earlier.
For example, if your offer is accepted August 22nd but your “close date” (when you officially own the home) is September 30th, you will pay a deposit of typically $5,000 to $10,000 within 24 hours of the offer being accepted (August 22nd) and then the rest of your down payment will be paid September 30th.
YOUR CLOSING DATE
Lawyer: $850 to $1,500
Down payment: 5% of the purchase price or higher (typically 5-25%)
Land Transfer Tax: ~1.5% of the purchase price
Once conditions have been met and your offer is officially accepted, you'll have to hire a lawyer to handle all the official documents involved. (Don’t worry, I can connect you if you don’t have one.) There’s not really a way around this unless you have a friend or family member who’s a lawyer and willing to help out at no cost or reduced fees.
This process usually begins immediately after the offer is accepted, but your fees won't be due until your closing date.
With the deposit out of the way, the rest of your down payment will be due on your closing date. This amount varies per home and per mortgage approval. It can be anywhere from 5% of the purchase price and up, typically landing somewhere between 5% and 20%. If it’s not your first real estate purchase OR if it’s your first but you’re not planning to live there, it’ll usually be a minimum of 20%.
Next up, the land transfer tax. This is typically around 1.5% of the purchase price. This is due on your closing date, but if you’re a first time home buyer, you can actually apply to get this reimbursed.
Click here to learn more about first-time home buyer incentives like this.
Property tax: ~1% of the purchase price
Home insurance: varies
Property tax is a necessary evil of home ownership, but the good news is the government bills you in two separate chunks. The “Interim tax bill” represents 50% of the previous year’s tax bill and is payable on the third Thursday in March. The final tax bill is the balance of the year’s taxes and is payable on the third Thursday in June.
This cost can definitely creep up on you, so be sure to set aside some cash for it! If your home is valued at $350,000, your property tax should be around $3,766.
Click here to visit the City of Ottawa Property tax information that provides more details about property tax in Ottawa as well as the additional fees that can be occurred when changes have to be made to your account.
Other than that, most of your home payments will be on a monthly basis. Depending on your preference for home insurance, you can choose to pay either annually or monthly.
Water: varies on usage (often $50-100, billed every two months)
Natural Gas: varies on usage (often $75-100)
Electricity: varies on usage (often around $50-60)
Mortgage: varies (often $1,000 to $2,200)
Home insurance: varies
When looking to purchase a house, it’s more about how much cash you’ve been able to save up. One of the most important pieces people often forget is guaranteeing you have a saving system in place that continues once you’ve made the purchase.
Monthly fees quickly add up, even before considering the ongoing payments you most likely already have as a renter: Internet, phone bill, groceries, weekend activities, gym memberships, and so on.
This can sometimes mean making some lifestyle changes or adjusting how you treat your bank account. Planning ahead before these monthly payments hit is the most efficient way to make sure you’re not screwed once it starts.
MISCELLANEOUS HOME OWNER FEES
Now we’ve covered most of your ‘mandatory’ costs, but there are a few other costs to think about:
Desired (or sometimes necessary) renovations
Unexpected repairs (hot water tank, washing machine...)
Maintenance costs (grass seed, lawn mower…)
Optional services (snow removal, lawn care, cleaner)
I know, it feels like a lot. But educating yourself is the first step to making it more manageable. So you’re on the right track!
Knowing what’s coming will make it a lot less painful than when it all hits you in the face.
Disclaimer: I am not a mortgage specialist and the above should only be taken as loose information. Please contact a mortgage specialist or bank for formal advice. This information is not formal advice or instructions. The primary focus of this content is to provide basic education and any numbers or estimates provided are rough estimates. Any information used for a real estate purchase should first be consulted on a one-on-one basis with myself or another licensed professional.