Sometimes new homeowners can get a little more than they bargained for when it comes to the cost of a home. There are many hidden expenses that can arise before, during and after a new home purchase and they can take you by surprise if you don’t plan ahead. While the purchase price of the home may be your biggest consideration, don't forget to include these other expenses in your budget.
GST
The goods and services tax (GST) applies to real estate along with other tangible goods. In many cases, the GST is included in the contract price of a new home. If you buy a new home for up to $350,000, you can get a rebate of 36% of the GST, or up to $8,750. If the home is priced between $350,000 and $450,000, the rebate is lowered on a sliding scale.
There is no GST rebate on homes over $450,000.
New Home Warranty
As of February 1, 2014, home warranty is mandatory in Alberta under the New Home Buyer Protection Act. This covers (new) single-family homes, duplexes, multi-family homes, condos, and manufactured homes. Builders can provide this through one of seven home warranty providers in Alberta. According to the government, the new home warranty will add around $2,500 to the average cost of a home.
CMHC Insurance
CMHC insurance, also called mortgage default insurance, is required if you have a down payment between 5% (the minimum) and 19.99%. CMHC insurance is designed to protect lenders if a borrower defaults on the loan. CMHC insurance will cost between 1.80% and 3.60% of the mortgage and it will be applied to your mortgage amount.
While mortgage default insurance is not an up-front cost you pay when you buy your home, it is still an added expense to keep in mind as it will increase your mortgage payment. You can minimize mortgage default insurance by increasing your down payment.
Property Taxes
Property taxes are an important part of owning a home. The property taxes you pay in Edmonton help pay for public transit, parks, road maintenance, snow clearing, and fire and police protection. You can pay property taxes annually in June or in monthly instalments.
If you're wondering how much property taxes might be for a prospective new home, you can use the City of Edmonton's website to approximate what you will pay. The average assessed value for a single-family detached home in Edmonton is $408,000 in 2016, which means average property taxes of $3,117 per year or $259 per month.
Home Insurance
You will need a homeowner's insurance policy when you buy your home. The cost of this insurance depends on many factors, including the type of home you buy, its location, the size of the home and lot, building materials, and much more. You can expect to pay around $900 per year for homeowner's insurance on a single-family home. You may qualify for a discount if you buy other insurance policies through the same company.
Landscaping
Landscaping is an often overlooked but major expense when it comes to a new home. New homes are often sold without landscaping, so you should budget for the cost of grading, sod, plants, sprinkler systems, paving stones, and other elements. Get a quote from a landscaping company to help you estimate these costs.
Fencing, Deck, Patios
Don't forget that fencing, decks and patios are not usually included in the construction of your new home. Installing a fence can add to the price of the home, and the cost of a deck will vary depending on the size and material.
Detached Garage
Building a detached garage on the property and having it finished can easily add thousands to the cost of the home. Some home buyers choose to save money by having a basic detached garage built and finishing it later or forgoing the garage altogether. However, when adding a garage at the same time as the home, you’ll be able to add it to the cost of the mortgage.
Moving Expenses
Getting some friends to help you is certainly the most affordable way to move into your new home, but it may not be an option. Whether you rent a truck and do it yourself or hire movers, make sure you factor the cost of a truck rental, movers, boxes, and other supplies into your budget (like beer and pizza for the friends helping you!) If you're hiring movers and moving within the city, you can expect to pay at least $1,000.
New Furniture
Moving into a new home may mean buying new furniture to fit your space, especially if you're moving from a smaller home or condo. You may need to buy blinds or drapery, appliances, or additional indoor and outdoor furniture, for example. Don't feel pressured to buy everything all at once. Buy what you need at first and spread out major purchases to avoid a big hit to your savings right after moving in.
Planning for these hidden costs of buying a home ahead of time will prevent you from taking on a steep mortgage and stretching your finances to the max. Not only will being prepared help you plan ahead financially, you will feel less stressed knowing you’ll be able to handle any surprises that might come your way.
