The hidden costs of buying a home nobody warns you about

It’s an exciting time, isn’t it? You’ve been dreaming of homeownership, perhaps scrolling through listings, imagining your life in a new space. You’ve likely heard a lot about down payments and mortgage rates, and those are certainly big pieces of the puzzle. But what many first-time homebuyers don't realize, and what often catches them by surprise, are the other costs involved. These aren't hidden in a malicious way, but they're simply not always top-of-mind when you're focused on the big picture. As a mortgage broker, I've seen many clients navigate these waters, and my goal with this article is to give you a clear roadmap of what to expect beyond your down payment.

Beyond the Down Payment: Closing Costs You Need to Know

When you purchase a home, there’s a flurry of activity between your accepted offer and getting the keys. During this period, several expenses, collectively known as closing costs, will come due. These are typically paid on or before your closing date and can add up to a significant amount.

Legal Fees and Disbursements

You'll need a lawyer or notary public to handle the legal transfer of property from the seller to you. Their fees cover their professional services, such as reviewing contracts, conducting title searches, and registering the mortgage. On top of their fees, there are "disbursements" – these are out-of-pocket expenses the lawyer pays on your behalf, like land title registration fees, courier costs, and perhaps even a small fee for ordering a tax certificate. While these can vary, budgeting anywhere from $1,500 to $3,000+ is a good starting point for legal costs in BC.

Property Transfer Tax (PTT) in BC

This is a big one for homebuyers in British Columbia. The Property Transfer Tax (PTT) is a provincial tax levied on the fair market value of the property when it changes hands. For most properties, the PTT is calculated as:

• 1% on the first $200,000
• 2% on the portion from $200,001 to $2,000,000
• 3% on the portion from $2,000,001 to $3,000,000
• 5% on the portion greater than $3,000,000

As you can see, this can quickly add up to tens of thousands of dollars. For example, on a $700,000 home, your PTT would be $12,000.

However, there are exemptions! First-time homebuyers may be exempt from PTT on homes valued up to $500,000, with a partial exemption for homes up to $525,000. There are also exemptions for newly built homes up to certain values. It's crucial to check if your options look for these.

Adjustments on Closing

On your closing day, your lawyer will calculate "adjustments." These are prorated costs for expenses the seller has already paid for a period extending beyond the closing date, or expenses you will owe for a period before you take possession. Common adjustments include:

• Property Taxes: If the seller has paid property taxes for the entire year, you'll reimburse them for the portion of the year you'll own the home.
• Strata Fees: For condos or townhouses, you'll reimburse the seller for any strata fees they've paid in advance.
• Utilities: Sometimes, utilities like water or garbage collection are paid in advance and will be adjusted.
• Fuel Oil: If the home uses fuel oil for heating, the seller will be reimbursed for any fuel remaining in the tank.

These adjustments ensure that both buyer and seller pay their fair share based on their period of ownership. While often not as substantial as PTT, they can still add hundreds or even a few thousand dollars to your closing costs.

Mortgage-Related Expenses

Beyond the principal and interest, there are a few costs directly tied to your mortgage that you should be aware of.

Appraisal Fee

Before a lender approves your mortgage, they'll typically require an appraisal of the property. This is to ensure the home's value aligns with the purchase price, protecting their investment. The appraisal fee, usually around $300-$500, is often paid by the buyer, though sometimes lenders will cover it.

CMHC Insurance (or other default insurance)

If your down payment is less than 20% of the home's purchase price, you'll be required to pay for mortgage default insurance. In Canada, this is most commonly provided by CMHC (Canada Mortgage and Housing Corporation), but also by Sagen (formerly Genworth Canada) and Canada Guaranty. This insurance protects the lender in case you default on your mortgage.

Mortgage Broker Fees

Here's a cost you don't generally have to worry about! In almost all cases, my services as a mortgage broker are free to you, the client. I'm compensated by the lender once your mortgage funds. This means you get expert advice and access to multiple lenders without an extra bill.

Moving In: The Post-Closing Budget

Once the keys are in your hand, your spending isn't quite over. There are several costs associated with moving in and settling down.

Moving Costs

Whether you hire professional movers or rent a truck and enlist friends, moving has costs. Professional movers can range from a few hundred to several thousand dollars depending on the distance, volume of belongings, and services required (packing, unpacking). Don't forget costs like packing supplies, temporary storage, and perhaps even pizza and drinks for your helpful friends!

Utility Hook-Ups and Deposits

You'll need to set up accounts for electricity, natural gas, internet, and sometimes water. Some utility companies may require a security deposit, especially if you're a new customer in their service area.

Home Insurance

Before your lender will release mortgage funds, you must have home insurance (also known as homeowner's insurance or property insurance) in place. This protects your home and its contents from perils like fire, theft, and natural disasters. You'll typically need to pay the first year's premium upfront, which can range from hundreds to over a thousand dollars annually, depending on your home's value, location, and coverage.

Initial Maintenance and Repairs

Even if you bought a move-in-ready home, there's always something. Perhaps you want to paint a few rooms, change the locks, or buy some new appliances to fit the space. It's wise to set aside a contingency fund for these initial expenses. Even small things like lightbulbs, cleaning supplies, or new shower curtains can add up.

The Stress Test and Your Borrowing Power

Budgeting and Saving: My Best Advice

Given all these potential costs, how do you prepare? 2. Use a First Home Savings Account (FHSA): If you're a first-time buyer, the FHSA is an incredible tool. You can contribute up to $8,000 annually, to a lifetime maximum of $40,000. Contributions are tax-deductible, and withdrawals for a qualifying home purchase are tax-free! It's like an RRSP and TFSA combined for home buying. 3. Consider the RRSP Home Buyer's Plan (HBP): You can withdraw up to $35,000 from your RRSP tax-free to use as a down payment, provided you repay it within 15 years. This can be combined with the FHSA. 4. Get Approved by a lender: This is perhaps the most important step. A lender approval gives you a clear understanding of how much you can realistically borrow, taking into account the stress

Related mortgage resources

• Explore my free intake for me to review to see where you stand with no obligation.
• Explore my home purchase planning to plan a confident purchase.
• Read Buying Your First Condo in Burnaby: A Practical Family Guide for Metro Vancouver Buyers for a related BC mortgage perspective.