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The hidden costs of home ownership every first time buyer should know

We all know that buying a home can be expensive and something you need to save up for. But did you know that there are hidden costs when it comes to home ownership? Financial planner Shannon Lee Simmons breaks down what you think to know, especially if you're a first time buyer. 

The monthly cash flow hit

People tend to compare the mortgage of their home to their rent. For example, if rent is $2500 and projected mortgage payment is $2400, people assume, "it's $100 cheaper a month with a mortgage."

This is something that happens all the tiem. There are many other things to consider on a monthly basis like water, heat and hydro, property tax and home insurance. These costs all add up! 

Closing costs

Closing costs can be a huge hit to your finances. If a couple has $60,000 saved up, they may be using all of that for a down payment according to their calculations. But, there are closing costs that will eat into that. Legal fees can typically be $1500 and the land transfer tax can be anywhere from $4000 - $24,000 depending on the home you buy.

For example, a $600,000 home in Toronto would have land transfer tax of approximately $17,000 or $8500 if you're a first time home buyer. That means that you don't actually have the $60,000 to work with for a down payment.

Repairs and maintenance

This tends to be important when it comes to older homes. Things likea  knob and tube removal and leaky plumbing are things that don't get flagged in a home inspection.

Plus, there's on-going repairs and maintenance all the time! If the furnace breaks, it's on you. Leaking pipes are your financial problem now. Even though the value of your home may be going up, that's not cash in your pocket to handle these costs unless you sell.

Interest adds up

Everyone knows that you're paying interest, but people tend to forget about it over the years. If you have a $400,000 mortgage over 25 years at 3.5%, you'll pay $200,000 of interest. That's half the mortgage value! This is something to keep in mind when buying a home.