Congratulations! You are ready to buy your 1^st ever real estate property. It could be a condominium unit, detached home or even a multi-unit property. Or perhaps you are looking to purchase your 2^nd, 3^rd or 5^th property. As real estate lawyers, one of the first questions when clients contact us to open a real estate file is: “When should I calculate my costs on a purchase?” The Answer: RIGHT AWAY! It is never too early in a real estate transaction to crunch the numbers. But in order to do so you must always remember that there are TWO sets of calculations to keep in mind when buying a real estate property:

1. The cost to close the transaction; and
2. The ongoing costs to maintain and keep the property!

Starting with the costs to close the real estate transaction, a purchaser should be speaking with their realtor and mortgage broker as early in the purchase process as possible. Don’t be afraid to create a closing budget even before putting in an offer on a property. In fact, making the closing budget early on will help a purchaser better understand their financial abilities and constraints in being able to afford a particular property. Between the cost of the property, land transfer tax(es), title insurance and lawyer closing costs, a purchaser should have the financial information handy as to how much monies a lender will lend them on a particular property, and the source of the remaining funds available to the purchaser in order to complete the transaction. Translation in English: Make sure you have enough money available to comfortably close the purchase of a real estate property before deciding to buy it!

Once the first budget is established, then the inexperienced purchaser often forgets or overlooks the second budget. It is one thing to be able to afford to close the purchase of a real estate property, it is another thing to have the funds available to carry the property every month. This is where a purchaser can sit with financial advisors, including a mortgage broker, accountant and/or financial planner to understand the monthly costs to carry a property and the affordability for the purchaser given their income and financial means. When buying a freehold property, advisors will often recommend to create a reserve fund (based on the idea of condominium buildings) to cover major repairs/replacements. Otherwise, having a line of credit is another option homeowners use to cover unexpected home costs. Either way, make sure you can afford the costs to keep the home in addition to the expenses related to purchasing the home!

If you are planning to purchase a real estate property and have legal questions, we are here to help! The lawyers at Kormans LLP are here to guide you through the process. Contact us by clicking here for a quote on your particular transaction and for your free consultation and let’s get started 😊

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