Imagine If Realtor.ca had brackets behind the list price with an estimate of all the *extra* stuff, you might not be thinking about when buying your new home! How much money should you really be saving for your real estate purchase? Well… That depends on your price point.
Start by talking to the mortgage advisor to see what you can afford. Then, start working backwards off that number.
For the sake of this argument, your mortgage advisor told you that you were approved for a home up to $850,000. You never want to go to your maximum pre approval level. This can add unwanted stress to your household if you have an unexpected expense in the future.
Try and aim for a dollar amount below that you are comfortable with. That way you’ve got extra money to save for home repairs, and other unexpected expenses. The rule of thumb is to save about 3% of your purchase price. That is $25,500 based on the example purchase price.
Here’s the breakdown of what you need to consider before buying a property, depending on your situation. Many homebuyers quickly realize they need to go lower than the pre-approval once they factor in all these additional costs that will come out of their savings.
The downpayment is the obvious one, but did you know that there are potentially thousands more you’ll need to account for? If it’s your first time buying a home, there are some significant savings involved. If this isn’t your first rodeo, the land transfer tax could be enough to tilt your options.
- Lawyer Fees ($750-1000)
- Home Inspection ($500+)
- Septic/Water Testing (if applicable)
- Property Taxes (varies)
- Utility Setups (can be waived, varies)
- Provincial Land transfer tax (on an 850k home is $13,475)
- Municipal Land Transfer tax also applies if you are buying inside the city.
Based on these calculations alone, a 20% downpayment, and a 3% savings for repairs, you’ll need roughly $212,000.
As a first time buyer with 5% down and no land transfer tax, you have to save around $65,000.
Being a home seller means you will need to account for agents' commissions in the sale. Before going with a discount brokerage, go through a list of what the contract includes. If saving on commission means you won’t get professional photography, staging, and marketing exposure, you’ll have to consider those into your out-of-pocket expenses.
It’s often better to go with a full-service Realtor that will market your listing to its best potential, getting you a higher sale price in return.
If you’re selling your home for $700,000 to buy your new one, based on 5% commission, you’ll need to set aside $35,000 to cover it. Great agents make up for their fees by getting you the best sale price for your home.
You should also consider these costs when factoring in the sale:
- Storage locker rentals for your stuff (anywhere from $50-250 a week)
- Cleaners before the day it goes on the market
- Repairs such as painting, filling cracks, etc.
Working with a dedicated, knowledgeable Realtor can help you figure out the overall price tag that comes with the move. That way, you can be prepared and make an informed decision before going to your max pre-approval. Reach out anytime with a price point, and we’ll number crunch for you.