Before I purchase a home, how do I determine what it will cost me each month to carry it?
It can be tempting to jump into a purchase before considering what it will cost you each month to run your home, so good for you for thinking ahead.
We encourage consumers to be informed before they make a purchase. One of the ways to do that is to work with your real estate professional to get the information you need about a home’s carrying costs.
Aside from your monthly mortgage payments – and optional mortgage, life or disability insurance, if you choose to buy it or are required to – there are a number of costs you and your salesperson can determine before you put in an offer.
First of all, taxes for the property should be on the listing information, but your salesperson should confirm the amount. Be aware that, depending on time of year, the amount listed could be from the previous taxation year and so your taxes for the current year could be higher.
The same applies for condominium fees. The listing information should contain the actual fee amount, but your salesperson should confirm that number and what it includes.
There are also a number of monthly costs for keeping the house in good working order. These include your heat source – which could be electric, gas, propane, oil or wood – as well as your hydro costs and any fees for municipal water, sewer or garbage pick-up.
The home may also have a number of rented or leased items you need to know about. For example, homeowners can either own or lease their furnace, hot water tank, air conditioning unit or ducting.
Your salesperson can ask the homeowner for copies of previous utility and service bills. However, not everyone uses utilities and services at the same rate, so the amount you would end up paying could be different than what you see on the bills.
If you decide to buy a condominium, some come without a parking space included in the price, so you may need to rent one. A locker is also a possible rental cost in condos.
When you purchase a home, you must also buy liability and property damage insurance or you won’t be able to get a mortgage. You can get quotes from a number of insurance companies and pick the one you think gives you the best coverage at a price you can afford.
Depending on the size of the property or your physical abilities, there may be costs associated with land maintenance, such as grass cutting, gardening, eaves trough maintenance and snow clearing. The same is true for cleaning the inside of the home, if you are considering upsizing or clearing snow for that matter.
While some of these costs are usually seasonal, they should still be factored into your budget for the months in which they apply. Again, your salesperson can ask the homeowner for past bills for those services if they have used them.
And finally, it would be wise to set aside “rainy day” funds on a monthly basis for repairs that come up over time with home ownership.
There is no doubt it is a smart move to consider the ongoing costs of maintaining a home before you buy, and a registered real estate person can help you determine those costs. After all, what good is buying your dream home when you can’t afford to carry it?Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.