What are the extra costs to be aware of before buying a home?

What are the extra costs to be aware of before buying a home?

Article by Heather Chilvers, Coldwell Banker Bermuda Realty 

Whether you are looking to buy your first home or trading up to a larger one, there are many costs, on top of the purchase price that you must figure into your calculation of affordability. These extras include fees, such as taxes, bank charges and other additional costs could surprise you with an unwanted financial concern on closing day if you are not prepared!

Appraisal Fee:  Your lending institution will request an appraisal of the property which can vary from upwards of $400 depending on the size of the property.

Land Taxes:  Should be paid 6 months in advance and will be required to be paid on a pro rata basis upon closing.

Structural Survey Fee:  If the home you purchase is a fixer upper or older property the bank may request a structural survey or you may feel you would like one. Typically, the cost of a full structural survey - structural, electrical and plumbing comes in LESS than 0.2 percent of the purchase price. ie. $1,000,000 home the structural survey would be less than $2000 (typically). 

Fees are based on sq footage, number of living units, pool, dock etc. but on average the cost is less than 0.2 percent of the purchase price. Which can be a small price to pay for peace of mind on an investment of this magnitude. 

Property Insurance: Home insurance covers the replacement of your home, structure your lending institution will request that you are insured and it protects their investments on the loan.

Service charges:  Any new utility service you hook up such as telephone, cable or internet may require an installation or set up fee.

Legal fees:  Even the simplest home purchase should have a lawyer involved to review all paperwork. Shop around, although there are bar association guidelines, costs can vary depending on the complexity of issues or experience of the lawyer.

Stamp Duties on the Conveyance: Applied whenever a property changes hands and are on a sliding scale depending on the value of the property. A note for first time buyers in Bermuda - If you have never owned property before and the property you are buying is under $750k - As a first time buyer you are exempt from stamp duties on the conveyance, which can save you as much as $12,000.

Stamp Duties on the Sale and Purchase Agreement:  The Sale and Purchase contract must be stamped in order to be legal. The stamps are $25 on the original and $1 each on both the two copies. The original usually stays in the real estate agent’s office, and one copy goes to the vendor’s lawyer and one to the purchaser’s lawyer.

Mortgage Loan Insurance Fee: Depending on the equity in your home some mortgages require mortgage loan insurance. This type of insurance will cost you between 0.5% and 3.5% of the total amount of the mortgage. Usually payments are made monthly or annually (in advance) in addition to your mortgage and land tax payment, and policies are actually almost identical to term life insurance.

Mortgage Brokers Fee: A mortgage broker (or bank) is entitled to charge you a finder’s fee, in order to secure you the money and make arrangements for the financing. This fee is usually 1% of the mortgage value. 

Moving Costs: The cost for a professional mover can be in the range of $100 upwards per hour for the truck and additional for each extra man hour. This fee can be higher at weekends, evenings and on public holidays.

Maintenance Fees: Condos charge monthly fees which generally cover things like building insurance, exterior maintenance, exterior painting roofs and walls, and upkeep of common area. These can range from $300 a month to over $1000 a month in some of the more luxurious complexes. So be sure they are part of your budget.

Water Quality Certification: If you have any doubt as to the quality of the water either in the tank or coming from a well on the property. You should have it tested by the ministry of environment and there is a small charge. Depending on the results you may need to have your tank emptied cleaned and repaired.

Some of these costs are one time fixed payments, whilst others represent an ongoing or monthly or yearly commitment. Not all of these costs will apply in every situation however it’s better to know so you can budget properly.

Remember buying a home is a major milestone. Whether it’s your first, second or tenth home. There are many important details to address during the process. The last things you need are unbudgeted financial obligations cropping up hours before you take possession of your new home, so talk to your real estate agent about additional costs in advance.

Heather Chilvers is amongst Coldwell Banker Bermuda Realty’s Leading Sales Representatives. She has been working in Real Estate for 27 years. If you have a question for Heather, please contact her at hchilvers@brcl.bm or 332 1793. All questions will be treated confidentially.

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