How Much Should You Really Budget Beyond the Purchase Price?

Finding a home that fits your budget involves more than deciding how much you can afford to offer.

The purchase price may be the biggest number in a real estate transaction, but it isn’t the only one. There are several costs that can arise between writing an offer, completing the purchase and actually settling into your new home.

We encourage buyers to understand these expenses before they begin shopping, so there are fewer surprises later.

Property Transfer Tax

For most buyers in British Columbia, one of the largest closing costs is Property Transfer Tax, which is generally payable when ownership of the property is transferred.

Depending on the buyer and the property, exemptions or reductions may be available — including programs for some first-time buyers and qualifying newly built homes.

This is one of the first numbers we recommend establishing because it can have a meaningful effect on the amount of cash you need at completion.

Legal or Notary Fees

A lawyer or notary handles the legal side of completing your purchase, including reviewing documents, registering the transfer of ownership and mortgage, and accounting for the funds involved in the transaction.

There may also be additional disbursements for items such as title searches, registrations and other administrative costs.

Your lawyer or notary can provide an estimate well before completion.

Home Inspection

We generally recommend that buyers consider a professional home inspection whenever the circumstances allow.

An inspection won't tell you everything that could ever go wrong with a property, but it can provide valuable information about the home's visible systems and components and help identify areas that may need further investigation.

For a detached home, buyers might also consider additional inspections depending on the property — for example, a sewer scope, oil tank scan or specialist review.

These costs are money well spent when they help you make an informed decision about a significant purchase.

Mortgage Costs

Your lender or mortgage broker can help you identify any expenses associated with arranging your financing.

Depending on the circumstances, these could include an appraisal, mortgage insurance or other lender-related costs.

It's important to have the financing conversation early. Knowing what you qualify for is useful, but knowing how much you are comfortable spending each month is equally important.

Those aren't always the same number.

Property Insurance

Insurance will normally need to be in place by completion.

The cost can vary significantly depending on the type, age and location of the property as well as the coverage selected.

For a strata property, the strata corporation carries insurance for the building and common property, but owners still require their own insurance for the suite, personal belongings, liability and other coverage.

Reviewing the strata corporation's insurance information can also be an important part of your due diligence.

Strata Costs Buyers Sometimes Overlook

When purchasing a condo or townhome, there may be costs beyond the monthly strata fee.

Depending on the building, these can include move-in fees, deposits, parking or storage arrangements and other charges.

More importantly, buyers should understand whether there are special levies already approved or major projects being contemplated.

That's one reason we spend so much time reviewing Form Bs, strata minutes, financial statements and depreciation reports with our buyers. A relatively modest monthly strata fee doesn't necessarily tell you the whole financial story.

Adjustments at Completion

There are also adjustments between the buyer and seller.

For example, if the seller has already paid certain property taxes or other expenses covering a period after the completion date, the buyer may reimburse the seller for their portion.

These adjustments are normally calculated by the lawyer or notary handling the transaction.

They aren't necessarily large, but they're another reason the amount required at completion may differ from what a buyer initially expects.

Moving — and the First Few Weeks Afterward

Then there are the practical costs of actually moving.

Movers, storage, utility connections, new locks, window coverings, furniture and all the little purchases associated with a new home can add up surprisingly quickly.

And most homes have something you will want to address once you move in.

Perhaps it's painting a bedroom, replacing an appliance, servicing the furnace, buying patio furniture or fixing something discovered after possession.

We recommend keeping some money available rather than putting every available dollar into the purchase itself.

What About Renovations?

This is particularly important if you're buying a property that needs work.

Before deciding that a lower-priced home is automatically the better financial choice, try to develop a realistic idea of what your planned improvements may cost.

Cosmetic changes can sometimes be completed gradually. Larger projects involving kitchens, bathrooms, electrical, plumbing, structure or exterior work can require a much more substantial budget.

The question isn't simply:

Can I afford to buy this home?

It is:

Can I comfortably afford to own it and make it work for me?

Don't Let Your Maximum Become Your Target

A mortgage pre-approval can tell you how much a lender may be willing to lend you. It doesn't mean you need to spend that amount.

We would much rather see a buyer purchase a home comfortably within their means and retain some financial flexibility than use every available dollar simply because they qualify to do so.

Homeownership comes with ongoing costs, some predictable and some decidedly less so.

Having a buffer gives you choices.

Build the Whole Budget Before You Start Shopping

Before beginning a home search, we suggest looking at four numbers:

Your available down payment + your estimated closing costs + your anticipated immediate expenses + the financial cushion you want to keep after completion.

What's left helps determine a much more realistic purchasing budget.

That preparation can also make the buying process easier. When the right property comes along, you're making the decision based on numbers you've already considered rather than trying to calculate everything under the pressure of an offer.

Buying a Home Is About More Than the Purchase Price

There will always be costs associated with buying and owning a home. The goal isn't to predict every dollar perfectly.

It's to go into the process with your eyes open.

When we work with buyers, part of our role is helping them understand not only the property they're considering, but also the expenses, documents and potential issues that come with it.

The best purchase isn't simply the home you can qualify for — it's the home you can comfortably afford to own.

If you're thinking about buying in North Vancouver, we'd be happy to help you work through the process and understand what to plan for before you start making offers.