Today we will go over how much you will need to save to buy a house! Of course, this amount will vary but we will use average Central Alberta housing price for illustration purposes and go over what you will need in the bank for down payment, closing costs, inspections, etc. It may seem overwhelming and if you’re a first-time home buyer you may be thinking “How will I ever save for all this?!” deep breathe! The good news is Alberta is one of the most affordable provinces to buy a home in! Another bonus, Alberta doesn’t have land transfer tax which can be up to 2% of the purchase price in other provinces.
1. 5% minimum Down Payment
Currently, the average single family detached home in Central Alberta is selling for $359,350. So, 5% of that equals $17,967.50. Of course, you can put more down if you’d like! It will help lower your monthly mortgage payments and mortgage insurance premiums if you do.
2. Inspection Costs
Inspections aren’t mandatory however, highly recommended. Roughly, budget anywhere from $300-$1000 for inspections. A standard home inspection is average $550 however, you can find cheaper. You may want to perform other inspections such as a sewer inspection which can be an additional $250-400. I would budget $1000 and if you spend less, bonus!
3. Closing Costs
Closing costs will vary depending on the lender you have, mortgage amount, and if there are municipal taxes owing for the rest of the year. There may be other adjustments as well. However, I would budget $2500 to be on the safe side. At the time of writing an offer, you can ask a lawyer for an estimate that may be more accurate. $2500 in legal fees for a $359k purchase with 5% down is reasonable to expect.
4. Appraisal Costs (If needed)
Sometimes lenders will require an appraisal (typically they add this cost onto the mortgage so it’s not out of pocket. Typically, this amount is roughly $300)
If it’s your first time having a utilities account, the provider may ask for a deposit. This can range in amounts but prepare for $500 to be on the safe side.
6. Your First Mortgage Payment
The good news is your first mortgage payment is typically a month from when you take possession. Confirm with your lender. This amount will be due moving forward on a monthly basis or however you structure it. There are options to pay bi-weekly or weekly.
7. Moving Costs
Hiring movers can vary. It would be best to get a quote from a reputable moving company. Movers can charge anywhere from $100-300 an hour plus fuel costs. Sometimes, they may charge more for extra heavy pieces of furniture. If you have the manpower, The Melissa Morin Team with Century 21 Maximum offers a complimentary moving truck to clients for their use! So that can save greatly on movers or a rental truck. Another tip, if you move during the week vs. a weekend, the movers tend to have better rates.
Approx. grand total not including movers or moving expenses: $21,967.50
Quick Ideas to Help You Save To Buy A House
- Consider a budget and cut un-necessary spending back such as eating out, Starbucks, etc. Take what you normally would spend and put it into your house fund!
- Thrift instead of buying new! Clothes are expensive, thrifting can be an alternative while you save to buy a house.
- Automatic savings with your bank account. Consider having a chunk automatically come out of your bank account on pay day into a savings account that you cannot easily transfer money out of.
- Sell things you don’t need… clothes that no longer fit, things you don’t use, etc.
- Income tax refund- put into savings.
- Consider discussing with a mortgage broker other options such as a borrowed down payment or cashback mortgage to help with expenses.
- Find a side hustle to increase your income! Maybe you like to bake, or cook, and can sell some of your creations for a side profit. Child minding, skip the dishes driver, etc. There are many “side hustles” you could take up on your free time to save.
- Get a roommate for your current living situation (if renting) to help with living expenses.
- Be realistic. It may take 2-3 years to save but 2-3 years will go by anyways! If your goal is to own in 3 years let’s say, start planning NOW. Take the amount you need (for example $21,967.50) and divide it by the number of months until you wish to own. So, let’s say 3 years (36 months) = $610.20 a month. There are on average 30.42 days in a month, so $610.20 / 30.42 days is only $20.05 a day! If you can cut back your spending by $20.05 a day for 3 years, you will likely get into your first home. Or find a way to make that amount in a side hustle.
We are committed to helping you buy your first home. If you have any other questions please feel free to reach out to us. We highly recommend planning with a mortgage broker so you can ensure you will be ready to qualify when you have the savings. Down payment and additional costs are important to note but there are other requirements such as credit score, income etc. A mortgage broker can help prepare you for this!
Sincerely, Melissa Morin with Century 21 Maximum & The Melissa Morin Team 403-318-5665