If you haven't already heard via my "Updates" blog post, my Instagram (@amyjoyharrison) or just me annoyingly mentioning it in every conversation, Calvin and I have purchased a lovely new house in London's Cedar Hollow neighbourhood. Our situation is somewhat unique because in order to make our offer super appealing we were willing to close (buy the house) in less than 30 days, which means right now we have two houses! It's kind of neat to have this nearly 2 month long overlap because we can slowly move boxes over and really get our new house fully ready before leaving our current one. It's also unique because our house has never been lived in before. It was just finished building and was used as a model home. That being said, I've got a pretty good grasp on all the fun little hidden expenses of purchasing a home. Let's just say if the tag says $300,000 that's nooooot exactly all you'll be paying...
DISCLAIMER: This isn't meant to scare anyone. Just keep you responsible. Owning a house is Awesome and good for your finances if you do it right.
First things first:
how much do you have to pay for the house?
Well, depending how motivated the owners are to sell, and how the market is doing/ how much interest there is in the home, you might be able to get it below the asking price. Consider the value to you, consult your agent (let me know if you need a good one!), and see what you're pre-approved for mortgage-wise at the bank. Sometimes they will take a lower offer if it's more attractive in other ways like a sooner closing date and less conditions. (We didn't put a condition for a home inspection on ours because the home is under warranty so if anything's funky with it we just submit a form and it gets fixed.) *Unless you literally have the cash for the whole price of the home, make your offer conditional on financing to avoid going to court if things fall through.
The offer will likely be accepted or rejected within 24 hours. You may be able to negotiate a "cooling off period" of a week to 10 *business* days in which you make sure you've made the right decision.
Upon the offer being accepted (a few days later)
you'll need to pay:
- A deposit: anywhere from $1,000 to maybe $10,000 that proves you're good for the money. This money will be deducted from how much down payment you owe.
Upon closing (anywhere from a few weeks to a few months later)
you'll need to pay:
- The remainder of the down payment. This can be as low as 5% (I think) but is quite commonly 10%. If you pay at least 20% you'll skip some fees later which is great! The more you pay now the less your mortgage is, and therefore the less your monthly payment is, so give as much as you comfortably can.
Here's the trick. Between the offer being accepted and closing, a lot of expensive stuff goes down. A lawyer reviews your contract agreement, there are searches and transfers of the deed and title and land taxes and rebates and tons of stuff you can't do by yourself. In the end you won't get a bill for all of it, it'll work like this. The amount you just paid for a deposit will be reduced. For example:
Say you paid $10,000 deposit. And your down payment is supposed to be $30,000. You'd think you would owe $20,000 (30,000-10,000) at closing, but no.
Your deposit is now $10,000 minus the lawyers fees, taxes and dispensaries, which might make it more like $8,000. So $30,000-8,000 you owe $22,000. If this is your first house purchase (and your partner's) you'll qualify for a few rebates to make this part less expensive. We also had to pay for our "Tarion warranty" which covers anything that goes wrong for about ten years - this is only offered to new builds as far as I know, and the registration was a couple hundred dollars.
Expenses before you even buy
- Listing your current home
- Fixing your current home up so that it's ready to sale (this could include a new roof - ask me for a recommendation of someone good to do it - a new furnace, painting, or even storing some of your belongings to make the home less cluttered) - you might be able to afford professional staging to make it more attractive to buyers
- Gas to drive around looking at houses
- Let's be honest, Starbucks drinks everytime you meet your agent
Moving itself
- Boxes (but try getting them for free from friends or grocery stores/ Costco)
- Moving truck
- Gas back and forth
- Can't forget treating your friends who help you move to some pizza and beer
- Consider if you'll need time off work, that counts as an expense too unless you're on salary and can take a vacation day
Expenses at the new home
- Will you need new
appliances? Budget at least $2,000 each for fridge, stove and washer/dryer, $1,000 for a dishwasher and a few hundred for a microwave if you're buying new. If the microwave isn't also a stove "hood" you'll need that too. And hoses for everything to hook up. You can buy used!
- We chose to install a
gas line. We both love cooking so a top notch stove was really important to us. I know a guy who can install it for $99 plus $6/foot (from water heater to where you want the stove to go).
- Need new
furniture because your new house is larger than your current? A three seater couch might be $400 on Kijiji or about $800-1,500 new. Beds even more than that (check out Ikea for good prices). We are doing a mix of new, used and DIY projects with friends.
- Consider how many
window coverings you'll need. Blinds range from $10 (for the cheapest 1" vinyl blinds with no black out, on a small window) to $500 or more (for fancy wood or cellulars on a custom size window with the option of opening from the top or bottom). Drapes can be an inexpensive option but are either closed (no light in) or open (no privacy), so consider doing a double rail system where you have a sheer drape under a thicker decorative one (you can get this for less than $100 at Ikea). They may need to be hemmed. Kids (and adults) may benefit from black out blinds or curtains.
- It won't be a huge part of your budget, but little things creep up, like - our current length of speaker wire to run our sound system isn't the right length for the new house so we need to get a new reel - only a few dollars but enough of these little purchases add up. Consider also all the screws, nails and anchors to hold your art, photo frames, etc.
- Things that stay with your old house like built in cabinets, mounted bookshelves, and wall shelving will need to be replaced
- Paint if you don't like the current colour
- Do you have a garage door that you'd like an automatic opener on? That's at least $300
- External fix ups: do you need some landscaping done? Do you need to rent a rototiller to put in a new garden? Do you want new potted pants to spruce things up? Does the drive way need to be done? Fences and gates? Do you like the current mail box? Outdoor lighting? Do you want to replace the key if you use a community mail box (should be free the first time and about $30 after that.) We needed to purchase address numbers for outside our house since the builder didn't put any up.
Lived in an apartment til now?- BBQ
- Lawn mower
- Patio furniture
- Dehumidifier (this was vital for us as it's a new build and the foundation needs to be kept free of humidity damage)
Bottom line, the price you see on the MLS listing isn't exactly all you're getting yourself into - so plan accordingly. I wish I had seen a list like this before buying, luckily my husband is a financial guru so he knew everything ahead of time.
If you know some extra items to add to this list let me know in the comments below. Happy homeownership!
Edit to add:
Wow thanks guys - already received some feedback. Here are things I missed:
- INSURANCE (for your house, your possessions, and for your ability to pay your mortgage payments if you get sick/lose your job)
- Apraisal fees
- Fees regarding your mortgage
- Paying the home inspector
- Setting up new hydro, gas, cable, home phone, internet, etc can have a fee attached
Labels: budgeting, expenses, homeownership
