The 7 unexpected costs to consider when buying a home

If it’s your first time buying property, you might be caught off guard by some of the hidden costs that come with purchasing real estate. Aside from the down payment and mortgage, there are a handful of other expenses to consider in your budget.

1. Closing costs

Every homebuyer needs to pay closing costs, which are admin fees associated with finalizing the sale. These costs typically include land transfer tax, title insurance, attorney fees, and more. Closing costs can add up to tens of thousands of dollars and can be a significant financial burden if you're not prepared for them. While these could vary substantially, try setting aside between three and five percent of the mortgage amount for closing expenses so you’ll be prepared.

2. Home inspection and appraisal

If you're considering buying a house, it's a good idea to have a professional home inspection and appraisal done before making any commitments. After all, you want to know what you're getting into, right? A home inspection can uncover potential issues with the property, such as structural problems or plumbing issues, that you might not notice on your own. Generally home inspections cost between $350 to $550 and is a cost that can save you far more money down the line. Sure, these inspections come with fees, but they can actually save you money in the long run. For example, if the inspection reveals that the roof needs repairs, you can negotiate a lower purchase price or ask the seller to make the repairs before you close the deal.

Getting an appraisal is also important if you're applying for a mortgage. It determines the value of the home, which can affect your financing options. Appraisals typically cost around $300 to $600 for a standard property. The price of the appraisal increases as the property becomes more rural. And if you get your mortgage with Pine, we’ll reimburse your appraisal fees. 

3. Home insurance

Like its name suggests, home insurance protects your home in case of damage or loss due to unexpected events like fire, theft, or natural disasters. Now, technically speaking, it's not mandatory by law, but most lenders will require you to have home insurance before they give you a loan. So it's definitely something you wanna look into. Typically home insurance for condos are under $100 a month while the cost of insuring a detached home can be over $200 a month. Insurance coverage that is more inclusive will also cost more.

Keep in mind that the cost of insurance can vary depending on factors like where you live, the size and value of your home, your credit score, and the coverage options you choose. To make sure you're getting the best deal, get quotes from different insurance providers and factor the cost into your budget before you buy. You don't want to be caught off guard with high premiums you can't afford!

4. Property taxes

Basically, your local government will assess your property and charge you a tax based on its value and the tax rate in your area. Property taxes are used to pay for public services governed by local governments such as roads and sewers.

Now, here's the thing: property taxes can vary a lot depending on where you live. So before you buy a home, it's super important to research the property tax rates in the area and factor them into your budget. You don't want to be hit with unexpected bills that you can't afford! Typically property taxes range from 0.5% on the low end to 2.5% on the high end. Larger municipalities typically have a smaller percentage property tax as the home values are much higher and are sufficient for supporting the required local public services.

And here's another thing to keep in mind – property taxes can increase over time. So even if you think you can handle the tax bill now, it might get more expensive down the road. Just something to think about when you're crunching the numbers.

5. Home maintenance and repairs

Owning a home comes with ongoing maintenance and repair costs that can add up over time. The truth is, keeping up with regular maintenance tasks like mowing the lawn, keeping pests at bay, and taking care of your HVAC system can get pretty pricey.

And then there are those unexpected repairs that come out of nowhere: a leaky roof, a broken furnace, or a messed-up plumbing system. These things can happen at any time and they usually require immediate attention and some serious cash. Typically home maintenance may take up around 3% of the total home value per year. This is a hefty sum of money that needs to be set aside every year to ensure that your home is still livable. Condo owners have it easier through a fixed monthly fee.

That's why it's super important to budget for ongoing home maintenance and repairs. You don't want to be caught off guard by a surprise repair bill that you can't afford. So make sure you're setting aside some funds for these expenses.

6. Utilities and home services

As a homeowner, you'll be responsible for paying monthly utility bills, such as water, electricity, and gas. These costs can add up and vary depending on your location, usage, and service providers. Additionally, you may need to pay for other home services, so be sure to set up your accounts in the municipality you live in once you get the keys. The total cost of electricity, water, gas, internet, cable and home phones can be upwards of $300 a month.

7. Homeowners Association (HOA) Fees

If you're buying a home in a community with a homeowners association (HOA), you may be subject to monthly or annual HOA fees. These fees cover the cost of maintaining common areas, such as parks, pools, or landscaping, and may also include other services or amenities, such as trash removal or security. It's important to understand the HOA fees and rules before purchasing a home in an HOA community and factor them into your budget.

As mentioned, these are only some of the unexpected expenses that could come along with your purchase. This is why it’s important to buy within your means, so you can comfortably afford your mortgage and the extra costs that come with it. You can always ask your mortgage agent to explain what costs will come with your property so you can budget your finances accordingly. Happy shopping!