When you consider how much it costs to purchase a home, the first thing you think of is the down payment. Down payments get all of the attention because they are big, flashy amounts of money. The down payment is the end goal, but it’s not the whole story.
There are many other costs associated with buying a home, and these are called closing costs. Most websites will outline a few standard closing costs, like the land transfer tax and home inspection, but in reality, there are at least a dozen closing costs you need to consider.
When I was closing on my home almost two months ago, it seemed like every time I turned around there was a new cost to deal with, many of which I hadn’t anticipated. So I did what any personal finance blogger would do: I kept a detailed list of every dollar I spent while purchasing my home so that I could share them with you – and help you be a little more prepared than I was!
Without further ado, here is exactly how much I paid for my home!
The tl;dr breakdown is at the bottom of the post.
As I mentioned, the down payment is the largest amount of money you’ll put down on your home, which is why it gets the most attention. I put down 10% on my $270,000 offer, so I paid $27,000 up front for my home.
Land Transfer Tax (LTT)
You didn’t think you’d get away with buying a home without having to kick back to the government did ‘ya? Most home purchases require the seller to pay a land transfer tax. It varies from province to province, and some municipalities apply additional taxes, like Toronto, and Vancouver.
Nova Scotia’s LTT is 1.5% of the purchase price, so I had to fork over $4,050.
Lawyer Fees & Disbursements
You’ll need a real estate lawyer to complete your transaction. My real estate lawyer charged $1,029.25, plus $100 for deed registration, $100 for mortgage registration and $279 for title insurance.
Prepaid Property Taxes
Since we were buying the home in the middle of the year, we had to reimburse the seller for the property taxes she had prepaid until the end of 2016. Reimbursing her ended up costing us $872.07. Prepaid property taxes is an expense that many homeowners forget about – don’t be that homeowner!
Our home is heated with an oil-fired furnace, so the seller was required to fill the tank before she left. Of course, we had to reimburse her for this cost – setting us back $802.36.
Home Inspection & Contractors Estimates
Since the home I purchased is over 80 years old, I thought it was a good idea to hire a home inspector to make sure there wasn’t anything sinister lurking within the walls, like knob and tube wiring or cast iron piping. The home inspector we hired specialized in older homes, and cost $500.
During his inspection, he noticed two dips in the roof that looks like rotten plywood underneath the shingles. To make sure this wasn’t a multi-thousand dollar repair, I contacted a roofer for a quote to repair which cost $150. Fortunately that fee will be applied against the invoice for the repairs, which are scheduled to take place next month.
Purchasing Additional Chattels
We had included normal chattels in our offer to buy such as the washer, dryer, fridge, and stove. But a few weeks after our offer went firm, the seller offered to sell us more furniture and appliances. We ended up purchasing a dehumidifier, a deep freezer and an additional refrigerator in the basement for a cost of $350.
Utility Hookup Fees
A few weeks before moving in I called to arrange the hookup of our power, the internet, and water. Fortunately, the power didn’t cost us anything as they only needed to read the meter. The internet changeover came with a hookup fee of $59.95 and the water utility charged us a $25 administration fee.
Since we needed homeowner’s insurance, I took the opportunity to shop around for a better insurance rate. I found one at TD Insurance, but since we were new customers they required us to pay a double payment upfront for both our home and car insurance. This cost us $276.48 for the first go (that’s two car and house insurance payments), but they assured me that they would reimburse us after a year.
On moving day we rented a Uhaul to move all of our stuff. The cost to rent the Uhaul was $50.
Beer & Pizza
We recruited several friends to help us move the bulkiest items from our third-floor walk-up apartment. It wasn’t pretty, and there was a lot of PIVOT! involved. The least we could do was keep these friends flush with beer and pizza throughout the process, which cost about $100.
Here’s the total breakdown:
In total we paid $35,744.41 to get into our home. $27,000 of that was the down payment, and the remaining $8,744.41 was closing costs.
Many of these expenses could’ve been nixed or reduced if I’ve had the time or inclination to hunt for the best deal. To reduce expenses, I could’ve:
- gone with a cheaper home inspector
- found a less reputable contractor who wouldn’t charge for a quote
- opted out of buying the extra furniture
- argued with the internet hookup fee
- not switched insurance providers
- gotten a smaller Uhaul
- not thrown in a few extra iced coffees and takeout meals under my beer and pizza budget
But, the whole process was more than a little stressful, and I didn’t have the mental capacity to hunt for deals at that time.
How to Budget for Closing Costs
Even if you follow this list closely, odds are your home purchase won’t be exactly the same as mine, and you’ll encounter other closing costs that aren’t on this list. To be as prepared as possible, you should budget to pay between 1.5 to 4% of the home’s purchase price in closing costs. I ended up paying 3.2% of the home’s purchase price, which puts me right in line with that estimate.
Now I want to hear from you: how much did you pay in closing costs? Was there one expense that caught you totally by surprise? I want to know!
Photo Credit: Eduard Militaru