What are the costs involved in buying and owning a home?

When buying a home, there can be several one-time costs that you should be aware of. These can include:

And there are a number of ongoing costs to understand as well, including

Down payment

A down payment is the cash portion of the home’s purchase price that you pay for yourself. The rest of the purchase price is obtained through a mortgage. The larger your down payment, the smaller your mortgage will be. A smaller mortgage means you’ll likely have a smaller regular payment and pay less interest in the long run.

If you have a down payment of 20% or more of the home’s purchase price, you may qualify for a conventional mortgage. If you don’t have 20% to put down, you may still qualify for a high-ratio mortgage, if you can put down at least 5% of the purchase price of the home. High-ratio mortgages require you to get, and pay a premium for, mortgage default insurance from a qualified insurer such as Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial Canada (Genworth). Mortgage default insurance protects the lender in case you default on the loan.

A first-time homebuyer can withdraw up to $25,000 ($50,000 for a couple) from their Registered Retirement Savings Plan (RRSP) under the Home Buyers’ Plan to use for their down payment towards a qualifying house. If you repay the withdrawn amount in full within 15 years, you won’t have to pay any tax on it. Be aware, though, that timing is everything; the RRSP funds must reside in your RRSP for at least 90 days before you withdraw them under the Plan.

Visit the Canada Revenue Agency website for complete details regarding this program.

Consult your tax and legal advisors with respect to your particular circumstance.

Closing costs

Closing costs are one-time charges paid at the time your home purchase closes. You’ll want to budget for these – they’re in addition to the purchase price of the home and must be paid on your closing date. Typically, closing costs can include:

Legal fees — You’ll need the services of a lawyer or notary during the purchase process. He or she will assist you with your purchase offer, title search and other critical steps. Fees can vary and are typically your responsibility, so prepare yourself by getting an estimate before you proceed.
Appraisal fees — Depending on the type of property you’re purchasing, your lender may require that an independent appraiser determine its value. With Manulife Bank Select, Manulife Bank will pay for the initial appraisal.
Title insurance — Title insurance protects you in the event someone challenges the ownership of your property. The responsibility for this cost varies among lenders.
Land transfer tax — Most provinces require you to pay a one-time land transfer tax when you assume ownership of the property. The amount of tax is usually based on a percentage of the home’s purchase price and the province you live in.
Upgrade charges — If you’re buying a newly constructed home and have changed elements of its design and structure, your builder will charge you for each change. You can pay these costs in advance in cash, or you may be able to add them to your mortgage.

Utility account opening costs

Some utilities and services may ask for a payment to open the account, or may ask for a security deposit. These can be hundreds of dollars, so do some research so you are prepared for these costs.

Mortgage default insurance (for high-ratio mortgages)

If you’re purchasing a home with a down payment less than 20% of the purchase price, you may qualify for a high-ratio mortgage. This type of mortgage requires that you get mortgage default insurance. While there are other sources of this insurance, your lender may require that your insurance be purchased from Canada Housing and Mortgage Corporation (CMHC) or Genworth Financial. The mortgage insurance company calculates the one-time premium for the insurance as a percentage of the mortgage taken out. This insurance enables individuals with a smaller down payment to purchase a home. With Manulife Bank Select the premium is added to your mortgage and is included in your regular mortgage payments.

Property taxes

Your municipality will charge you property taxes based on your portion of local resources such as hospitals, schools and waste pickup, as calculated by your property size. With Manulife Bank, you’ll make these payments directly to your city or town.

Creditor insurance

Creditor insurance, which can include life insurance, disability insurance and job loss insurance, is an optional insurance policy that pays your mortgage debt in the event of your death, and makes your regular mortgage payments for a period of time in the event of disability or job loss. It protects you or your surviving spouse from losing the home, providing a great sense of comfort at a difficult time for your family.

Household expenses

As a new homeowner you might be surprised by the costs of enjoying your home. Be prepared for household expenses, which may include:

Condo fees
Property insurance
Furnishings
Window coverings
Utilities – heat, hydro, and water and sewer
Property maintenance
Renovations
Emergency fund for the “what ifs” when things need to be repaired or replaced