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• August 04, 2022

Unexpected Costs to Consider When Buying A Home

Are you looking to purchase your first home? That’s awesome! But before you get the home buying process underway, it’s essential to be aware of all the unexpected costs you might run into that could affect your budget.

In this blog, we’ll go over all the unexpected costs associated with purchasing and owning your home so that you won’t be blindsided.

Keep reading to learn about the cost associated with:

  • The home buying process, including
    • Deposits and mortgage insurance
    • What are closing costs, and how much are they?
    • Appraisal, inspection and more
  • Costs of Homeownership, including
    • Tax and insurance
    • Potential mortgage renewal or prepayment fees 
    • Maintenance fees and shared amenities

Let’s get started!

Unexpected Costs As Part Of The Buying Process

Many first-time home buyers are often shocked when they experience all of the unexpected costs associated with the home buying process. In this section, we’ll touch on all of the costs of buying a house so that you’ll be prepared for them when it comes time to purchase your first home.


Not to be confused with your down payment, the deposit is the amount of money that you are required to pay up front to solidify a purchase and sale agreement. Usually the deposit is anywhere from 5-20% of the home’s purchase price, and will be included as part of the overall down payment amount at the time of closing.

Pre-construction homes generally require a 20% deposit no matter the purchase price and are paid in installments that are scheduled throughout the build.

Mortgage Default Insurance

You must purchase mortgage default insurance if your down payment is less than 20% of the home’s purchase price. This is designed to and protect the lender in the case that you are unable to make your mortgage payments and default on the loan.

Mortgage Insurance

Mortgage insurance and mortgage default insurance are two completely different things! While mortgage default insurance protects the lender, mortgage insurance protects you. 

Let’s look at the two different types of mortgage insurance you can choose from and how they work:

Mortgage Protection Insurance: This type of insurance will pay off your mortgage’s balance in the event of you or your partner’s death.

Life Insurance: This type of insurance isn’t mortgage specific, however in the case of an insured’s death, the death benefits will cover the following:

  • The mortgage payment
  • Outstanding debts
  • Living expenses
  • Child care costs
  • Anything else that is part of the protection plan

Closing Costs

Another set of costs that you need to be aware of going into the home buying process are the closing costs when buying a house. These are the costs that you are required to pay to transfer the home’s ownership from the seller to yourself. 

Here we’ll look at what these costs are and approximately how much they amount to.

Legal Fees 

Once you’ve found your dream home and signed your offer to purchase, it’s time to hire a real estate lawyer to handle all the paperwork and close the transaction.

Here are some examples of what your lawyer fees for buying a house will cover:

  • A title search
  • Purchasing title insurance
  • Registering your mortgage and property
  • Ensuring the downpayment and land transfer tax get to the correct office
  • Handle disbursements

Provincial Land Transfer Tax

When purchasing a home in Canada, all provinces except Alberta and Saskatchewan require you to pay a land transfer tax. The amount you are required to pay differs based on the property value. 

For example, in Ontario, if you purchased a home for $500,000, the purchase would be subject to a land transfer tax of $6,475.

Municipal Land Transfer Tax

This one only applies if you are purchasing a home in Toronto. If that’s the case, you must pay the municipal land transfer tax in addition to Ontario’s provincial land transfer tax. 

However, there is some good news if you are a first-time home buyer. As of March 2017, qualifying first-time home buyers are eligible for a rebate of up to $4,475 through the First-Time Purchaser Rebate.

Title Insurance

Title Insurance protects you (the buyer) and the lender from financial losses that can arise from a defective title. Common examples of situations where your title insurance policy would respond are:

  • Unpaid debts or liens (taxes, fees, etc..)
  • Fraud & forgery related to ownership of the property
  • Errors in the property assessment (boundaries & surveys)
  • Issues that may affect the sale of the home in the future


Sometimes, the seller may have prepaid their utilities and property taxes. When this happens and they sell their property before the period they have paid for has elapsed, you (the buyer) will have to repay them the prorated amount.

Broker Fee

Brokers may charge an additional broker fee for alternative and private mortgage products. This fee typically ranges from 0.5% – 2% and is charged upfront for the required due diligence and the loan arrangement.

This additional fee is usually not charged when dealing with prime mortgage products. Instead, the broker is paid a finders fee from the lender, just like they do with their own internal mortgage professionals.

Home Appraisal 

In some cases, the lender may require a home appraisal report to obtain your mortgage. If this is the case, you will typically have to pay for it out of pocket.

Home Inspection

In a highly competitive real estate market like the one we are currently experiencing in many Canadian markets, some bidders are forgoing a home inspection to get a leg-up on the competition. However, by ensuring you get a home inspection before making your offer to purchase, you will be able to identify any issues with the home that could cost thousands in the future to repair and potentially dissuade you from buying.

Unexpected Costs To Be Prepared For In Home Ownership

Now that we’ve covered the costs you need to be aware of during the buying process, let’s talk about the costs of owning a home.

Increased mortgage payments

Another thing you need to be prepared for in home ownership is increased mortgage costs. If rates have risen at the time of your mortgage renewal, or when you decide to refinance your mortgage midterm, you could face higher payments than before based on the new rates.

Renewal Fees

Did you know that once the term of your mortgage comes to an end, your lender has the option to charge a fee to renew for another term? If your lender does charge a renewal fee, it will be outlined in your original commitment letter. Make sure to look out for this so that you can prepare for this fee or choose a lender that doesn’t charge one!

Mortgage Contract Prepayment Fees

Whether you’re selling your home, refinancing for a better rate, or just paying off your mortgage early with a lump sum, you will be forced to pay a prepayment penalty if you break your mortgage contract mid-term.

The prepayment penalty amount will vary depending on the type of mortgage. If you have a variable rate mortgage, the cost is usually three months’ worth of interest. In contrast, the cost to break a fixed-rate mortgage is calculated using interest rate differential (IRD), which can be thousands of dollars more expensive.

Property Tax

Your annual property tax is another expense you’ll need to consider once you’ve purchased your home. Your property tax is calculated using the Current Value Assessment of your property, which is calculated differently from province to province.

Property Insurance

Protecting an investment as valuable as your home is a must. Property insurance provides coverage against loss or damage resulting from an insured peril such as fire, theft, or water damage. It also offers third-party liability coverage, which protects against lawsuits for property damage and bodily injury.

Although you will likely want to get this coverage anyway, it is important to know that your mortgage lender will require you to obtain property insurance to protect their stake in your property.


If you have experience as a renter, you likely know all about utilities and how much they can add to your monthly living expenses. Let’s take a look at all the utilities that you have to be prepared to pay for:

  • Hydro: This will be paid directly by you if you have a freehold agreement. If you have a condo agreement, some of these costs may be included, but it is rare.
  • Heat: This will be paid directly by you if you have a freehold agreement. If you have a condo agreement, some of these costs may be included, but it is rare.
  • Water: Renters are often surprised at the cost of water when they purchase a home. Water consumption and in some cases, sanitary sewer use will be charged based on the amount of water you use. 
  • Sewage/Septic Waste Collection: When sanitary sewer use is not included in the water bill, you are required to pay for it separately (unless you were on a septic system). If you purchase a home with a septic system, you can expect to pay a fee to have the system cleaned out by a professional every 2 to 3 years. 
  • Garbage and Recycling Collection Fees: Some municipalities don’t charge for garbage and recycling collection as part of their annual property taxes and may charge a fee instead. If you purchase a home in an area that doesn’t have any collection services available you will have to take your recycling and garbage to the treatment facility yourself and pay for a bag and/or drop-off fee.. 

Maintenance Fees and Shared Amenities

If you’re purchasing a condo, you need to be prepared for the monthly maintenance fees often included in condo agreements that cover the cost of maintaining the building and its common areas. 

Equally as important as being aware of these fees is understanding that they can increase over time. As a matter of fact, maintenance fees often increase 10-30% in the five years after a building is first occupied, and these fees can continue to grow as the building ages.

Special Assessments

Another expense you should be prepared for if you purchase a condo unit is special assessments. 

A condo corporation’s reserve fund is used to pay for major repairs or replacements of the condo’s common elements. If the reserve fund experiences a shortfall, then a special assessment can be levied against all condo unit owners requiring them to pay a certain amount upfront for the repair or replacement.

It can be challenging to predict when a condo may experience a shortfall that will require a special assessment to be levied. However, before making your purchase, you can review the Status Certificate that provides details about the reserve fund.

Prepare for the costs of home ownership with a mortgage broker

As you can see, buying a home can come with some unexpected costs, but if you are prepared, you’ll be able to comfortably budget for them and avoid surprises.

Luckily, you don’t have to navigate through this yourself. At Pineapple, our mortgage agents are experts when it comes to the home buying process and understanding all the costs associated with it. They can walk you through everything and help you find your dream home that fits within your budget.Get in touch today to learn more!

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