When it comes to buying a house, saving for the down payment is just the beginning. If you don’t want to end up house poor, it’s important to budget for all the potential expenses. Let’s break down all the hidden costs of buying a home and how to figure out exactly how much you need to save. 

1. The down payment (5-20% of purchase price)

What is it? The down payment is a percentage of the purchase price of the home that you must pay at closing. In Canada, you need to put a minimum of 5% down, but that percentage goes up depending on the home price. If you put less than 20% down, you will be required to purchase Mortgage Default Insurance, which is calculated as a percentage of your mortgage.

How much do I need to budget? You need to decide what house price you’re looking at, and what percent down you feel comfortable with. ATB’s Mortgage Affordability calculator can help you understand what home you can afford based on your current financial situation. To put things into perspective, here is how much you’d need for a $500K house:

5% down = $25,000

10% down = $50,000

15% down = $75,000

20% down= $100,000

2. Closing costs (1-3% of purchase price)

What are they? Closing costs are all the fees you will need to pay before you get possession of your home. This includes things like legal fees, home inspections, title insurance, and title registration. You may also need to imburse the seller for any property taxes they’ve prepaid which could be a few hundred dollars to a few thousand. 

How much do I need to budget? A good rule of thumb is to aim to save 1-3% of the purchase price of your home for these closing costs. Get quotes for these expenses in your area so you can get a more accurate estimate. Here’s a list of potential closing costs and an average of how much to budget for each:

Legal fees ($3K)

Title insurance (~$500)

Reimburse property taxes (~$1500)

Property appraisal (~$500)

Home inspection (~$1000)

5% GST in Alberta: new builds only ($0)

Land transfer tax: N/A in AB ($0)

Mortgage & title registration (~$500)

3. Cohabitation or prenup agreement (~$3000)

What are they? These are both legally binding agreements that can help protect couples who are purchasing a property together. A cohabitation agreement is for partners who are living together but not married, while a prenup is for couples who are engaged to be married. Both of these agreements will protect your assets, outline individual rights, and alleviate financial and legal stress in the event of a breakup.

How much do I need to budget? This is a document that your lawyer can draft up for you, so I would suggest obtaining a quote for your specific situation.

4. Moving costs (~$1000-$3000+)

What are they? These are expenses related to the process of actually moving from your current residence to your new home such as moving boxes and supplies, a truck rental, gas, movers and more. You also want to factor in any lost wages if you need to take unpaid time off work to move.

How much do I need to budget? The cost of moving can vary based on the distance of the move, the size of your home, and how much you’re doing yourself versus outsourcing. Hiring movers to pack and load your stuff will cost more than renting a truck and doing it yourself. Decide what your moving plan is, and obtain quotes based on that.

5. Maintenance costs ($8K+) 

What are they? Once you get the keys, there might be some immediate maintenance costs that came up during the inspection. Replacing old appliances or even just painting your walls can add a lot of financial strain if you’re not prepared.

How much do I need to budget?  Many realtors suggest budgeting $8000-$10,000 but this amount will depend on the home you’re buying (e.g. type, size, age, condition, and location) and what your financial safety net looks like. Do you have additional savings or an emergency fund to protect you in the case of unexpected expenses? Are you or your partner at risk of losing your job? 

6. Ongoing costs (1-5% of purchase price)

What are they? These encompass the additional expenses you’ll incur on an ongoing basis such as property taxes, home insurance, utilities, and maintenance. We’ve covered initial maintenance costs, but don’t forget about all the ongoing upkeep for your HVAC systems, plumbing, eavestroughs, landscaping, and more. 

How much do I need to budget? You can figure out your estimated monthly costs by using ATB’s Mortgage Payment Calculator. For annual home maintenance, aim to save 1-5% of your home price per year.

The most important thing is that you’re not jeopardizing your financial stability in order to buy a home. I recommend always overestimating these costs, because it’s better to have extra money left over than not enough. I know it may feel overwhelming looking at your goal savings amount, but being prepared upfront will help you avoid financial difficulties down the road.