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The true costs of homeownership

Ah, the joys of homeownership. There’s nothing quite like the feeling of getting those keys to your first home. And parking the car in your own driveway for the first time, racing to the door, unlocking the door and joyfully glancing at your partner or friend, as you twirl around the empty space.

You imagine where you’re going to put stuff, renovations you want to do. After all, you just saw a whole episode of Property Brothers, how hard can it be? Then the bills start quickly rolling in. Okay, so you kind of accounted for a few things, but unfortunately, homeownership costs don’t end once you sign. There are additional initial costs of owning a home and the everyday expenses that you need to account for. That’s where the true costs of homeownership lie and I’m here to break down some of them for you.

Look beyond the monthly payment

Wherever you look, home builders are trying their hardest to save you the math, by telling you how much it will cost per month to own your home. Ok, who are they kidding? Sure, it’s an easy way to rope you in, but don’t be fooled by the low monthly payments. There are many more costs involved than one simple monthly payment and although, it seems like interest rates will stay low for a while, any change in interest rates, can really affect that seemingly low monthly payment.

  • Closing Costs. Realistically, I could probably write a whole post on these, but I’m not going to do that. But many first-time homebuyers don’t consider the extra fees before you move into the home. Without getting into too much detail, in addition to the down payment, you have to pay a real estate lawyer, you may have to pay for mortgage loan insurance (in Canada, typically if your down payment is less than 20% of your purchase price. Here’s a breakdown of CHMC fees.), local land transfer taxes, title insurance, registration of the Deed and Mortgage, and other miscellaneous fees. We paid just under $7,000, due at closing, for all these goodies. This, of course, will vary by region, size of your home, size of your downpayment, etc. If you’re in Canada, closingcosts.ca can give you a rough estimate on your closing costs, that you can use to plan.
  • Interest Costs. After closing, you immediately start paying interest. Everyone knows this. But I don’t think that many grasp just how much. I would wager that the average homeowner pays at least twice the original cost of the home over the life of the mortgage.
  • Property Taxes. One more thing renters don’t have to worry about. Thankfully the info is pretty easy to get. Just do a search of homes in your desired neighbourhood on realtor.ca (MLS) or your local home listing service and they will have the property taxes listed.

Oh, I forgot to mention, in addition to closing costs, all your utility companies will also charge you a small setup fee, just for being a new customer. Aww, isn’t that nice? Welcome to the neighbourhood.

Getting zapped with utility charges

  • The essentials: electricity, heating gas and water. Utility rates can fluctuate greatly, depending on the size of your home, utility rates in your area, and the time of year. So, it’s always best to ask your parents, relative or a friend to get a rough estimate of how much it’s going to cost. Electricity and water rates tend to peak in the summer and heating gas, obviously peaks in the winter. But also check to see if the water heater is rented or owned. Some heating gas distributors already include that as part of their bill.
  • Non-essentials: home phone, cable TV, Internet. It pays to bundle where you can. Depending on your area, you can probably get a quick quote online or call them up on the phone. It will be largely dependant on you and what you’re willing to pay for. We manage to keep ours down to about $130 for all three, taxes in. But that’s only because we have the basic everything, except internet and call every year for new promotions. It can be much higher or much lower. It’s really up to you.

Just maintaining

Condo living? Pay set condo fees. For buying a house, the list is a little longer (but not always more expensive). But here are just a few of the expenses you can look forward to:

  • Approximately every 10-15 years. Roof, windows, garage doors made of wood, furnace, AC unit. Lucky for us, we’ll get to replace both our roof and windows this year. Roof for our size home averages about $3,000. Really cheap when you consider quotes for our windows came to an average of about $1,000 each! Ouch! So, make sure to tell Johnny to take his friends and their baseball gloves elsewhere.
  • Every 5-10. Driveway paved, house repainted, some appliances and furniture will need to be replaced.
  • And when you least expect it, all of those things. And other countless things that will break or require maintenance and the countless tools you will need to fix them. Think plumbing leaks, lawn maintenance, etc. That’s why it’s always important to have an emergency fund.

Looking good never cost so much

You can probably get away with milk crates for a while. But keep in mind, the bigger the home, the more furniture you’ll need and the more pillows and knickknacks you’ll want.

Want a greener lawn? Want to spruce up your kitchen? Or bathrooms? All of these items come with a price tag. I used to think many moons ago, like many others, that renting was just throwing your money away. Now I know, that’s really not the case. I’m not here to debate the merits of homeownership or any financial advantages to renting, for that matter — that’s a personal decision, just as much as a financial one.

I’m also not here to scare anyone out of home buying. I’m a homeowner myself and in many ways, I think a home can be a great investment. All I’m saying is that before you sign your life away. Before you decide to walk into a brand new home (to you) for the first time, really evaluate what YOU can afford. Not what the bank tells you. Know what you’re getting yourself into.

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