Uncovering the Hidden Costs of Homeownership in Canada

The hidden costs of owning a home in Canada

Are you thinking about buying a home instead of renting?

Buying a home can seem like a way to reduce living costs, but the actual expenses go beyond the monthly mortgage. Closing costs, property taxes, maintenance, and unexpected repairs can accumulate quickly.

Below, I will outline important financial responsibilities of home ownership. This will help you plan for long-term costs and avoid surprises.

More than a mortgage payment: expenses of a new homeowner

As interest rates decrease, many prospective homebuyers see this as a good time to enter the market. If you buy a new house, you will encounter closing costs, which include:

• Realtor’s commission
• Bank underwriting fees
• GST/HST and QST sales tax
• Legal fees

According to the Canada Mortgage and Housing Corporation (CMHC), closing costs can range from 1.5% to 4% of the home’s total price. For instance, if you buy a $500,000 home, your closing costs could be as high as $20,000.

Let’s look at some other financial obligations of homeownership.

1. Home insurance

Home insurance covers damages or total loss from disasters such as:

• A fire
• A tree falling on the house
• Flooding
• A roof collapsing under snow

Your home insurance premium may be included in your mortgage payment.

2. Mortgage insurance

Mortgage insurance is usually required for first-time buyers. The CMHC allows down payments as low as 5%. However, this comes with a requirement for mortgage insurance. This insurance protects lenders if homeowners cannot make payments.

3. Appliance repairs and replacement

As a homeowner, you must maintain and replace appliances. Unlike renting, your landlord is not responsible for this. Repairs can start at $100, while replacing major appliances can cost hundreds or thousands of dollars.

4. Landscaping and snow removal

You must maintain the property surrounding your home. This includes landscaping in warmer months and snow removal in winter. You can either buy tools for these tasks or hire a service.

5. Property taxes

You must pay annual property taxes based on the appraised value of your home. Not paying these taxes can lead to foreclosure.

6. Home repairs and maintenance

Homeownership requires budgeting for repairs, such as roof replacement approximately every ten years, typically costing at least $5,000. You may also need professionals to fix plumbing or electrical issues.

Is buying a home worth it?

With all these costs, you may wonder if homeownership is worthwhile. Renting offers flexibility and fewer responsibilities. However, rental prices often rise.

Homeownership may be beneficial for those seeking stability and space. Be sure to consider all ownership costs beyond your mortgage payment.

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.