Annual fees associated with a home

08 August 2024 by National Bank
Illustration of a wallet for an article about the annual fees associated with a home

When you put together your budget for purchasing a home, make sure you factor in an evaluation of the annual costs associated with the property. Here’s how.

In this article:

 

Do the exercise of listing the recurring annual fees associated with a $235,000 house, purchased with a down payment of $20,000 (with the HBP) and a mortgage of $215,000 amortized over 25 years with a fixed interest rate of 5.3%.

Note that the data and the estimated costs provided here are for reference purposes only, and will vary based on the value of your home, the area you live in, the utilities you use and the type of financing you choose.

In the case of a revenue property, also consider the rental income and expenses, as well as the taxes you’ll pay or receive.

Property taxes

Property tax is based on the market value of the building and on the tax rate of the municipality (these two values fluctuate). Property tax includes municipal and school tax (payable in a single instalment or multiple instalments).

Sometimes, municipal tax includes a sector tax (for the construction or renovation of local infrastructure) that only the residents of a particular sector will pay over a specific period of time.

Based on our example:

  • Annual amount to allocate to taxes: $4,260
  • Monthly breakdown: $355

Heating, electricity, gas…

Comfort comes with a cost, which can vary depending on the size and location of the house, and how energy efficient it is. 

For an existing home, ask to see the seller’s electricity and heating bills to better estimate what these costs will be. You can also get this information from Hydro-Québec or Énergir.

Based on our example:

  • Annual amount: $1,200
  • Monthly payment: $100

Telephone, cable, Internet

The amount to budget depends on the number and type of services you want to subscribe to. If the property is in a more remote area, you may have to pay supplemental fees to access certain services.

Based on our example:

  • Annual amount: $1,200
  • Monthly payment: $100

Home insurance

Home insurance is a requirement if you have a mortgage. The amount depends, among other things, on the cost of rebuilding the house, the residential sector it’s in (Is the area a target for robbery? Is it close to a fire hydrant or fire station?), as well as the number of recent claims you’ve made. Property insurance can therefore end up costing a lot more, or exactly the same as rental insurance.

Based on our example:

  • Annual insurance cost: $675
  • Monthly payment: $56.25

Repair and renovation fund

Houses need regular upkeep. In case of an existing house, you can rely on the home inspection report to give you a good idea of the work you’ll need to do in the short term. Depending on how well-maintained the house is, this cost can vary enormously.

Based on our example:

  • Annual reserve: $3,750
  • Monthly amount: $312.50

Co-ownership fees

These fees apply only to divided co-ownerships, undivided co-ownerships and townhouses and vary depending on the services they include and the maintenance costs of the building (ranging from a few dozen dollars to hundreds per month).

Annual amount for a single family home: $0

RRSP reimbursement

The Home Buyers’ Plan (HBP) facilitates the purchase of a first home by allowing you to withdraw funds from your RRSP to be used as capital for a down payment. However, this capital must be reimbursed to your RRSP within a maximum of 15 years, starting on December 31 of the fifth year following the withdrawal. That said, it’s still smarter to account for repaying the minimum amount from the get-go, if you want to be able to properly evaluate the true value of the annual costs you’ll be contending with in the future.

Based on our example:

  • Annual reimbursement: $1,333
  • Breakdown per month: $111
Picto of a light bulb

Good to know: the new tax-free First Home Savings Account (FHSA) also allows you to save for your down payment. However, one of the differences between the HBP and the FHSA, is that money withdrawn from an FHSA never has to be repaid.

To learn more about the FHSA, consult our article:
 → What’s the FHSA? And is it the right account for me?

Mortgage payments

Mortgage payments obviously need to be included in the budget. Aside from the capital you’ve borrowed, it’s the interest rate (fixed or variable) that influences the amount you’ll pay each month.

If you have a CMHC mortgage insurance, the amount of the mortgage generally includes your premiums.

If the interest rate on your mortgage is low, calculate your payments at a slightly higher rate to make sure you’ll be able to handle an eventual rate increase.

Based on our example:

  • Amount allocated to the reimbursement of your mortgage each year: $16,068*
  • Monthly mortgage payments: $1,339

Mortgage insurance (life, disability, critical illness)

Mortgage insurance is a good way to protect yourself against unexpected life events. This insurance can provide you with financial protection in the event of a prolonged work stoppage caused by cancer or disability, for example.

Note that life insurance is pre-requisite for disability and critical illness coverage.

Based on our example:

  • Annual insurance cost: $2148
  • Monthly payment: $179

Summary table of the annual fees for an existing $235,000 house

Description Monthly Annual
Property taxes* $355
 $4,260
Heating/electricity** $125 $1,500
Telephone, cable, Internet $100 $1,200
Home insurance*** $56.25 $675
Repair and renovation fund $312.50 $3,750
Frais de copropriété $0 $0
RRSP reimbursement $111 $1,333
Mortgage payments**** $1,339 $16,068
Mortgage insurance***** $179 $2,148
TOTAL $2,577.75
 $30,934

→ To view the full episode : The costs and fees surrounding real estate transactions

Would you like to discuss this with us? Contact your National Bank advisor or your wealth advisor at National Bank Financial. Don't have an advisor?
 

Make an appointment

If it is the first time that you buy a house, there are monthly payments that you must do. So, couple of ideas for us?

Yeah. You've got annual payment that are coming, you know, every year and that you must plan. You have, for example, the municipal and school taxes, which in some uh cities are quite high. If you buy a condo, you probably have the co-owner tax can be fee. You have a home insurance, and many landers will tell you it's required. Don't forget, monthly, that you must pay your internet, your cable, your food, your electricity, your gas, so you must look at your budget and make a new budget when you buy a house to make sure that you can provide for all these fees and costs that you will have.

And, another thing Andrée, you know, as a financial planner, we always say that we need to have an emergency fund and very often we've seen that people will use that emergency fund to increase their down payment so that they don't pay the premium for insurance as much, but then there will be things that will happen, so you really need to make sure that either you don't touch it. That would be the best world. If not, you need to rebuild it very quickly because emergencies will happen while being the owner of a house, so that's something not to forget either.

Yeah. You're very right on that for sure.

Well, thank you Andrée.

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* This amount varies depending on the property evaluation.

** This amount varies depending on the condition of the house.

*** This amount varies depending on the neighbourhood and reconstruction value of the house.

**** This amount varies depending on the interest rate granted by the financial institution you chosen. The interest rate here is a 25 years fixed rate of 5.3%.

***** Fees are based on a male and female, 32 year old non-smoking couple. This amount varies according to the age, gender, smoking status and coverage chosen.

 

Tags :
Home, Mortgage