5.4.1 Case study: Costs of buying a home

Francis and Angela knew that buying a new home was a big financial commitment, but they'd been saving for a year, and with their parents' help they had $30,000 they could spend. The house they wanted would cost $225,000, and they wanted to renovate the kitchen and bathrooms to make them more modern.

"The down payment on the mortgage, including mortgage insurance, is over $17,000," Angela said, "and all the fees will be another $4,500 at least."

"$4,500! Where did that come from?" Francis asked.

Angela showed Francis a list of expenses:

• Property inspection, $350
• Appraisal fee, $150
• Legal fees, $750
• Closing costs, $300
• Taxes*, $2,000
• Moving costs,$1,000
• Hook-up costs (cable, phone, internet), $300

"And there's sales tax on all the fees, too," she pointed out. "All together, it'll be over $5,000." Francis added a few items of his own.

• Replace fridge, $1,000
• New gardening and maintenance tools, $250
• Drapes for windows, $750

Angela added it up. "Including the down payment, we're spending over $22,000 before we even start. We have about $8,000 left, and there are probably more expenses we haven't thought of yet."

"I don't think we can do the renovations we want for $8,000," Francis said.

"You're right," Angela agreed. "Maybe we can paint the rooms ourselves, and put off the renovations until later."

* Note: Fees and taxes differ among provinces and territories. For example, while most provinces charge a land transfer tax such as Quebec's taxe de mutation, Alberta, Saskatchewan and rural Nova Scotia do not.

Lessons Francis and Angela learned:

• Buying a home involves many large and small costs.
• Planning your buying and moving costs in advance helps you get a realistic estimate of the total costs.
• Be prepared to adjust or delay your plans to fit your budget.