The real cost of home ownership

Listing price, mortgage rate, down payment, taxes, fees, insurance. There is so much more to the cost of home ownership than people often stop to think about. Sorting through all the information can be challenging, especially when resources from Nova Scotia are pretty hard to come by, and most examples feature houses that are double or quadruple the value of my home. It can be very challenging for those un the lower end of the income spectrum to estimate our actual costs. I’ve been a home owner now for 7 months, and it’s taken about this long to fully understand all of the costs associated with my purchase.

I put in an offer on my house in September 2020, at a time when interest rates were low, but just before prices in my area started to skyrocket due to out of province buyers. The price we negotiated was $115,000. I lot of luck and good timing went in to that transaction, and deals like that are somewhat harder to come by at this point in time, but I’m already seeing similarly priced homes periodically popping up in my area. Don’t give up on your search yet!

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Before Closing:

There were a few expenses that I encountered prior to closing on my house. The first was the home inspection, at roughly $600. It was money well spent to know all the many little things that I can work on improving, and the reassurance that nothing expensive or dangerous should creep up for a while. The inspector gave us a rough estimate of how much certain projects would cost and when key components would need to be replaced, and even including all of her recommendations, the cost was still below what we feel the house to be worth.

The other expense was a deposit of $1000. This money is an assurance that you’re serious about buying, because you have put real money on the table which you stand to lose if you back out of the purchase.

Lastly there was a deposit for my home insurance. It was $130 and would cover my first month and set up fees.

Total: $1730

Closing Day:

This was the day that money from 3 different sources was all paid to the seller of the house. Some of the money was out of pocket, but most of it was in the form of two loans – one for my down payment and the other the full mortgage.

Here’s what that looked like:

Purchase Price – $115,000

Property Tax – $314 Taxes are billed in April and September. Since I was buying in December, it was my responsibility to repay the seller for the December – April portion of taxes that he had already paid.

Fuel Oil – $767 If your new house has oil heat, the seller fills the tank before closing and you pay the cost of a full tank. This way the seller is reimbursed fairly for any oil they had already purchased. I had hoped to avoid this and fill the tank myself after closing when my cashflow was better, but I wasn’t able to.

It’s important to note that I purchased my home in one of the very few areas with no land transfer tax. In most parts of the province this tax will mean .5-1.5% on your purchase price, due on closing day. In my case that could have been an additional $575-$1725.

Legal Fees – $1295 This includes the service of a law firm and the fees associated with their services.

Total – $117,376 due

Minus the mortgage amount – $109, 250, and the down payment loan – $5750 along with the $1000 deposit made previously

Total – $1376 out of pocket.

The interest-ing part

My down payment loan is at 0% over 10 year, so I will not be paying any interest on that amount. Thank you Housing Nova Scotia.

The mortgage on the other hand is quite a bit more complicated. To begin with, all houses purchased with less than a 20% down payment require mortgage insurance. This one time fee is added to your mortgage amount, so you don’t have to pay it up front, but it added over 4% back to my total debt. And then there’s the interest. I locked in a great 5 year rate of 1.79%. So by December 2025 I will have paid XX in interest. I expect interest rates to rise between now and then, so when I renew I will likely have a higher rate, so it’s impossible to predict what the total costs will be. In the unlikely event that I maintain the same rate for the entire 25 years, when the mortgage is fully paid off it will have cost $142,000. That’s $27,000 more than the purchase price, without accounting for increases.

First 6 Months:

In terms of essential utilities we pay for electricity, town water and oil for heating. Moving my existing power account to the new house cost nothing, but I was required to pay a $35 connection fee for my new water account. I also set up an account for heating oil deliveries, with a 5c/l discount from my employer and $150 in savings over the first three bills. Additionally costs include homeowners insurance and property tax.

All of these expenses are billed on different schedules creating some budgetary challenges, some can vary from bill to bill, and they are all subject to increases over the span of my mortgage.

Mortgage – $217 bi-weekly

Insurance – $65/month

Power ~ $230 bi-monthly

Water ~ $145 quarterly

Property tax – $480 semi annually

Oil – I have very roughly estimated $1535, based one what I have spent so far, and one additional top up sometime around November.

DPAP loan repayments – $575 annually

Total ~ $11,452 for the first year.

So what is the real cost of home ownership?

I hope that providing my real numbers will give a perspective buyer a starting point for budgeting, and some idea what they are getting in to. I have not included and repair or upgrading costs, because we have spent very minimally on these things to date, and they will vary immensely in every situation. I’d suggest looking to your home inspection report to get an idea of what repairs are urgent and what they will cost.

So without further ado, this is the cost of owning my home.

Pre-ownership – $3106

Yearly – $11,452 increasing each year

25 Years – $318,000 +++

I did a bit of math, and assuming my household expenses go up a modest 1% per year for the entire amortization period of my mortgage, by the time I have paid off my house, I will have spent over $300,000 on housing related expenses, not including repairs or renovations, which will certainly be needed. This number is purely speculative, and for my own fun. While house values will surely increase in that time, I am not betting on selling for more than that amount. And frankly we could spend 10’s of thousands on improvements, sell in 5-10 years or take out a home equity loan to purchase another property. But what I do know for sure is that I have a home that I love, a great place to raise my family, and options for the future. Continuing to rent would have achieved none of these things.

In the end, the real cost of home ownership is priceless.