Let’s admit it: we’ve all been caught off guard by the “hidden costs monster” at least once in our lives. It’s when you think you’ve got enough money to buy something. But right before you make the purchase, you’re informed about the additional expenses you weren’t prepared for.
Unfortunately, this is the kind of tough spot most homebuyers end up in. Homebuyers often shortlist a bunch of houses for sale in Welland, thinking the properties would fit their budget. But at the last moment, they find out there are a whole lot of extra expenses involved that they didn’t account for, and suddenly, that dream home feels out of reach.
Don’t want to face this unpleasant situation during your crucial homebuying journey? Then, check out these 8 hidden (or least expected) costs that homebuyers often miss, and make sure you’re fully prepared for them.
Hidden or Unexpected Costs Involved in Buying a House
1) Closing Costs
Closing costs are the expenses you’ll need to pay to finalise the purchase of your new home. The closing costs typically include the various fees related to applying for a loan and transferring the ownership of the property. You’ll have to pay the closing costs when you sign the final paperwork to close the deal.
How Much Should You Budget For?
You should keep around 1.5% to 4% of the home’s purchase price for closing costs. For instance, if you’re buying a $750,000 house, you can expect to pay between $11,250 and 30,000 in closing costs.
2) Home Appraisal Fees
A home appraisal is an impartial evaluation of a property’s market value conducted by a certified professional. Your lender will ask for an appraisal to ensure the house is worth the amount you’re borrowing.
How Much Should You Budget For?
Expect to pay around $300 to $500 for the home appraisal. The exact fees will vary depending on the size and condition of the home you’re looking at.
3) Home Inspection Fees
A home inspection is a key step in ensuring the home you’re buying is in good condition. During this process, a professional inspector examines the property’s condition and gives you a detailed report on any issues or repairs needed.
The home inspection is not a mandatory process in home buying. But it’s wise to get it done as it can help you identify potential problems in your new home that could cost you later.
How Much Should You Budget For?
Home inspection fees are generally between $300 and $500, depending on the size and location of the home.
4) Earnest Money
Earnest money is a deposit you can make when you submit an offer on a house. This deposit serves as proof that you’re serious about buying the property. If the seller accepts your offer, the earnest money deposit goes towards your down payment or closing costs. In case the sale falls through because of a problem with the property or the contract, you may get your earnest money back. But if you back out of the deal for reasons not listed in the contract, you may lose the deposit to the seller. The earnest money is typically held in an escrow account until closing.
Like the home inspection, earnest money is not mandatory. But it’s a wise step to make your offer stand out, especially if there are multiple bids on the property.
How Much Should You Budget For?
The earnest money deposit is usually between 1% to 3% of the purchase price of the home.
5) Title Insurance
Title insurance protects you against any legal claims or disputes regarding the ownership of the property. Some mortgage lenders may require title insurance as part of your mortgage agreement. But even if your lender has no hard and fast rule regarding title insurance, you should still go ahead and get it. This way, you’ll be safeguarded from any potential legal issues or disputes that may arise later on regarding the property’s title.
How Much Should You Budget For?
Title insurance costs start at $150 and go up to $500, depending on the value of the home.
6) Property Taxes
Property taxes are typically due annually or semi-annually. But if you’re buying the house for sale in Welland near the end of the year, you may need to reimburse the seller. You would have to pay the seller the tax amount they’ve already paid for the portion of the year you’ll own the home.
How Much Should You Budget For?
The property tax amount can be calculated by taking the Welland tax rate for the year and multiplying it by the MPAC-assessed value of the home. In 2024, the residential property tax rate in Welland was 1.804003%.
7) Land Transfer Tax
You’re required to pay a land transfer tax when you buy a home in any city or region in Ontario. This is a one-time tax paid to the provincial government and is due on the closing day.
If you’re a first-time homebuyer, you may be eligible for the Ontario Land Transfer Tax Refund. This refund can cover up to $4000 of the land transfer tax. You can apply for the tax refund once you complete the home purchase. If you qualify, the refund will be deducted from your land transfer tax bill.
How Much Should You Budget For?
The land transfer tax in Ontario is calculated as follows:
HOME PURCHASE PRICE | MARGINAL TAX RATE |
First $55,000 | 0.5% |
$55,000.01 to $250,000.0 | 1.0% |
$250,000.01 to $400,000 | 1.5% |
$400,000.01 to $2,000,000 | 2.0% |
Above $2,000,000 | 2.5% |
This means if you’re buying a $700,000 home, your land transfer tax amount would be $8975.
8) Moving Costs
The moving costs can hit your wallet pretty hard whether you’re planning to hire professional movers or rent a truck. So, planning and preparing for these moving costs well in advance is wise.
How Much Should You Budget For?
If you’re hiring professional movers, you can expect to pay anywhere from $500 to $2500, depending on the size of your move and distance. In case you’re renting a truck, you might have to pay around $100 to $200 per day.
Brace Up for All Sorts of Twists and Turns
Other than the above-mentioned hidden costs, there are a whole lot of other things that can catch you off guard in your home-buying journey. You might have to face unexpected property issues, financing problems, or closing delays along the process. So, homebuyers, stay flexible and be prepared for anything that comes your way. Also, always work with an expert realtor who can confidently guide you through any hurdles. With a bit of patience and preparation, you’ll be able to handle whatever twists and turns come along your way!