The Total Cost of Homeownership

Edited by Admin
The Total Cost of Homeownership



By Jordan Lavin


Owning your home is a special kind of freedom. When the place is yours, you can do all the things you dreamed of when you were renting but never could.


Want to put a sledgehammer through a wall for no reason? You can do that.


Hate your fridge and want to get a new one? Throw it out.


Want to paint a giant mural of yourself on the living room wall? Grab a brush.


Want to replace your worn-out countertop instead of patching it with packing tape and declaring it “fine” like your landlord would have? Bring in the granite.


But with freedom comes responsibility. As a homeowner, you’re on the hook for everything. If you’re thinking of buying your first home, here are some of the expensive things you’ll have to worry about.


Expensive thing #1: Buying a home

If you’re planning to buy your first home, you might be surprised to learn that even the process of buying a home is expensive. Some services are free to buyers, like those of real estate agents and mortgage brokers. Others, not so much. Your real estate lawyer will do important work, like registering the property in your name and buying title insurance on your behalf. And, they’ll also charge you a couple thousand dollars.

Buyers are also on the hook for anything that’s been prepaid by the seller. That most commonly includes utility bills (especially homes that are heated with a fuel that’s stored on site like oil or propane), and prepaid taxes.

And in my own personal experience, house hunting can take up a lot of time. All those coffees, drive-thru visits and grocery store sushi are part of the cost and can put a serious dent in your chequing account.


Expensive thing #2: Having a mortgage

This is the number most people have in their mind when they think of the cost of homeownership. It’s like rent, except instead of paying the landlord to rent their property, you’re paying a lender to use their money.


The size of your mortgage payment is determined by a few factors: how much money you borrow and how long you need to pay it back. Your payment could also go up or down based on the mortgage rates in your area. There’s not a huge difference between mortgage rates in BC and mortgage rates in Ontario, but rates vary depending on where you buy.


If you’re thinking about buying your first home, a mortgage calculator can help you navigate all the different variables to figure out how much your mortgage might cost you.


Expensive thing #3: Property taxes

Property taxes aren’t the end of the world, but they can take a bite out of your monthly budget.

The amount of property tax you’ll pay depends on the appraised value of your home, and the city you live in. According to real estate website Zoocasa, property taxes on a $500,000 home can range from just over $1,200 per year in the city of Vancouver, up to almost $9,000 in Saint John, NB.


To make it easier for you to manage, most mortgage lenders will collect your property taxes along with your mortgage payment and pay your tax bills on your behalf.


Expensive thing #4: Heat and utilities

Bad things happen when you own a home in Canada and don’t heat it. Forget comfort- pipes can freeze and burst, and humidity can build up and cause mould. Heating is so important, lenders include the cost of heating a home when they determine how much mortgage you can afford.


Budget anywhere from a few hundred dollars a month and up to heat your home. Your mileage will vary based on your location and heating fuel – it’s going to be a lot cheaper to heat a home in Victoria with natural gas than it will be to heat a home in northern Ontario with baseboard heaters.


Expensive thing #5: Maintenance

They say you should budget 1.5% of the purchase price of your home for maintenance – every year. That means if you spent $500,000 to buy your home, you can expect it to cost $7,500 a year on average to maintain. Common repairs range from small cosmetic issues like paint, to broken appliances, to occasionally replacing major components of the home like roofing and windows.


That’s not to mention larger potential costs, such as major damage. That, of course, can be prepared for with the proper home insurance – though that adds even more costs to home ownership.


If you buy a condo, many of these concerns are taken care of by management. But they’re paid for by condo fees which are quite commonly several hundred dollars per month. Condo owners can also be subjected to special assessments, which are one-time payments over and above monthly fees that can be used to fund major projects.


Make your home work for you

Yes, owning a home is expensive, but it also opens up a lot of possibilities and flexibility. And there are ways of using your home to earn a little extra money so it can help pay for itself.


Many people rent a portion of their home to tenants who may be permanent or vacation renters. If that’s not appealing to you, you could also consider renting out a portion of your home to someone else for storage through SpaceiShare. Your unused basement area could be used for storing boxes, or you could open up a free space in your driveway for parking.


There are many costs associated with owning a home. Take advantage of every opportunity to use your home to make back some of that money and make your new home an even better investment than it already was.