10 expenses to expect when purchasing a first home
So, you're ready to become a homeowner, are you? To help you avoid the pitfalls of first-time homeownership, SSQ prepared a list of expenses you have to budget for.
When buying a home, people automatically think about:
- Paying the mortgage and interest on the loan
- Making a minimum down payment
- Renovating/updating all or part of the home
- Redecorating to their personal taste
However, there are several other important expenses to consider and budget for.
Although not mandatory, it is strongly recommended to have a home inspected before you sign the final purchase agreement.
You should always add a clause stipulating that the purchase of the home is conditional to an inspection by the building inspector of your choice.
An inspection covers all visible and accessible systems and components of the home, specifically its foundation, electricity, roof, plumbing, etc.
The price of an inspection varies according to the type of building, its location, size and age.
When must you pay for the inspection?
The inspector will set the payment terms and conditions.
Ask the inspector for an estimate and make sure to budget for it―you don’t want to be paying interest on this amount.
2. Municipal and School Taxes
The amount of municipal and school taxes you pay is based on the value of your home and varies from one city to another.
Ask the seller for a copy of the last municipal and school tax statements.
You can also contact the city to obtain these documents.
When are municipal and school taxes due?
The notary will calculate the municipal and school taxes you will have to pay the seller. This is referred to as an adjustment, which means you have to reimburse the seller for the taxes they paid pro-rated to the date on which you take possession of the property.
Municipal tax statements are mailed out in the first three months of the year. Several payment options may be available to you.
School taxes are mailed out in the fall.
3. The Notary
In general, the buyer is responsible for finding a notary and paying for their services, specifically:
- Fees related to the purchase agreement
- Publication expenses
- Copies of the contract
- Analysis of the deeds
You must also add the GST and PST to these fees.
A notary’s fees may vary according to the:
- Type of building and number of units
- Number of buyers
- Nature of the transaction
Be sure to shop around for a notary. The notary will ask you several questions to evaluate your needs and the time needed to prepare the documentation.
The notary must inform you of any change in fees.
When must you pay the notary?
The notary will set the payment terms and conditions.
To avoid any unpleasant surprises, talk to them before deciding to do business with them.
4. Land Transfer Tax
In Quebec, this is referred to as the Bienvenue Tax.
It is calculated according to the municipal evaluation or the sale price of the home, whichever is higher.
When must you pay the land transfer tax?
In general, the city will send you a notice of payment sometime between the 3rd and 6th month after your purchase agreement is notarized. You then have 30 days to pay it.
5. Mortgage Loan Insurance
If your down payment amounts to less than 20% of the purchase price, the Canadian Mortgage and Housing Corporation (CMHC) will impose mortgage loan insurance on your purchase.
The premium for such insurance is calculated based on the amount of the loan and the down payment.
When do you pay back mortgage loan insurance?
The mortgage loan insurance premium is simply added to your mortgage and you will pay it off as per the payment conditions determined by your financial institution.
At the notary's office, you will have to pay 9% tax on your mortgage loan insurance.
6. Actual Property Value
In some cases, your financial institution may need to know the actual value of the home you want to buy.
This means obtaining the services of a qualified appraiser who will calculate the market value of the home, which will be detailed in a report.
Find a property appraiser
If you don't want your moving day to end with a visit to a chiropractor, hire professionals.
Get at least three estimates and make sure the company you choose has enough insurance to cover any and all damages.
Moving into a new home means having to hook up your utilities (electricity, phone service, gas, cable, etc.).
For an idea of what this costs, go to:
9. Change of Address
If you're worried that your mail will not follow you to your new address, be sure to sign up for Canada Post's Mail Forwarding Service.
Depending on the package selected, it will cost between $54 and $235 to forward your mail to your new address.
10. Other Fees
Depending on your situation and the type of home your purchase, other fees may be tacked on to this list.
Taxes on New Homes
Provincial sales tax (PST) and goods and services tax (GST) must be paid on any new construction.
That's the law!
However, you can recover a portion of the taxes if your transaction meets certain criteria. For more information, consult the Revenu Québec site.
Condo Association Fees
Ask the seller for the monthly condo association fees and the maintenance costs that they cover. Sometimes, heating is included.
Check that a portion of the condo fees goes directly into a contingency fund and find out how much money is in that fund.
A healthy contingency fund will mean that you won't have to pay out-of-pocket for major renovations after you move in.
Call your insurance company when the value of your home and personal belongings changes.
Your insurer will adjust the amount of coverage and the premium to pay.
Mortgage Protection Insurance
Buying a home is a major investment, if not THE biggest one you'll ever make.
In case of illness, disability or death, you don't want to leave debt as your only inheritance. Protect your loved ones with mortgage protection insurance.
*Exclusions and limitations may apply. Please contact your insurance company for more information on your policy.