What a home costs beyond the mortgage

People budget for the mortgage payment. It is the number everyone quotes and the number every calculator produces. It is also only part of what the home costs each month, and on some properties it is a surprisingly small part.

The rest is not hidden. It is simply not on the listing, and it is the difference between a home that feels comfortable and one that feels tight for five years.

The ones lenders already count

Worth knowing which costs the lender has already factored into your approval, because it tells you which ones are deliberately conservative and which are your problem entirely.

Lenders include four things in your housing ratio: the mortgage payment, property tax, heating, and half of any condominium fee.

That is it. Everything else in this article sits outside the calculation. So an approval that looks comfortable on paper can still be tight in practice, because the lender never looked at your hydro bill, your water bill, your home insurance or your maintenance.

Property tax

Set by your municipality as a percentage of assessed value, and the percentage varies considerably between municipalities. Two homes at the same price in different cities can carry noticeably different tax bills.

Two practical points. Toronto’s rate is among the lowest in Ontario, which surprises people, though it applies to higher assessed values, so the actual bill is not necessarily small. And you can usually choose to pay it yourself or have the lender collect it with your mortgage payment and remit it. Some lenders insist on collecting it, particularly on insured mortgages.

Always look up the actual annual tax on the specific property rather than estimating. It is public information and the listing usually states it.

Home insurance

Not optional. Your lender will not fund without proof of a policy in force on closing day.

Cost depends on the property far more than on you: age, construction, roof, wiring, plumbing, whether there is a pool, claims history at that address.

The thing to watch, especially on older housing stock, is availability rather than price. Knob and tube wiring, aluminum wiring, an oil tank or an old roof can make insurers decline outright. That stops a closing, and it is one of the few problems with no quick workaround. Get quotes during the conditional period, not the week before closing.

Condominium fees

If you are buying a condominium, this is the largest of the additional costs and the one that varies most.

What the fee covers differs by building: usually the common areas, the building insurance, the reserve fund contribution, and often some utilities. Two buildings at the same price point can have very different fees depending on amenities and age.

Three things to understand before you buy.

• It counts against your borrowing power. Half the monthly fee goes into your housing ratio, so a high fee directly reduces the mortgage you qualify for at the same purchase price.
• It rises. Fees increase over time. Assume they will.
• The reserve fund matters more than the fee. A building with an artificially low fee and an underfunded reserve is not cheap, it is deferring the bill. When the roof or the garage needs doing, a special assessment arrives and it can be substantial. The status certificate tells you the state of the reserve, and your lawyer reads it during the conditional period. Take that review seriously rather than treating it as a formality.

Utilities

In a condominium some of these are inside the fee. In a freehold home all of them are yours.

Heat, hydro, water, and internet. Heating costs in Ontario depend heavily on the type of heat and how well insulated the home is, and an older detached house can cost multiples of what a new townhouse does to keep warm.

Ask the seller for a year of bills. Most will provide them, and it is far better information than a guess.

Maintenance, the one people leave out entirely

A freehold home needs a roof eventually. And a furnace, and windows, and a water heater, and a driveway, and at some point something expensive fails without warning.

None of this is a monthly bill, which is exactly why it gets left out of budgets. It arrives in lumps, years apart, and it is the single most common reason new homeowners end up carrying credit card balances.

A common planning heuristic is to set aside roughly one percent of the home’s value each year for maintenance. Treat that as a rough starting point rather than a rule: a new build needs less in the early years, an older home can need considerably more. What matters is that the number is not zero and that it goes somewhere separate from your day to day account.

If a big repair does catch you out, a home equity line of credit is a far cheaper way to handle it than a credit card, and it is worth arranging before you need it rather than during.

The one-off costs at the start

Separate from the ongoing ones, and they land in the same few weeks.

• Land transfer tax, the largest closing cost in Ontario, and charged twice inside the City of Toronto because the city levies its own on top of the provincial one. First-time buyers can claim back up to $4,000 provincially and up to $4,475 municipally.
• Legal fees and disbursements, plus title insurance.
• Adjustments, reimbursing the seller for property tax or utilities they prepaid past the closing date.
• Moving, and the immediate essentials. Window coverings, a fridge if none is included, paint, the locks you will want changed.

Our closing cost calculator covers the first three with the first-time buyer rebates applied, and the first-time buyer page sets out the rebates in full.

How to actually budget this

Take the mortgage payment, then add property tax, home insurance, condominium fee if there is one, every utility, and a monthly amount toward maintenance. That total is what the home costs.

Then ask whether that number leaves room for the rest of your life. Not whether you could survive it, but whether it leaves room for saving, for the unexpected, and for a rate that may be higher at renewal than it is now.

This is the calculation that decides whether ownership is comfortable or grim, and it is almost never the one people run before they make an offer. If you want it run properly on a specific property, send us the address and the numbers and we will go through the whole picture rather than just the mortgage.