Dear Heather,

I am looking at buying my first property. Apart from the price of the house, are there any additional costs to be aware of before buying?

First Time Buyer

Dear First Time Buyer,

Whether you are looking to buy your first home or trading up to a larger one, there are many costs on top of the purchase price that you must figure into your calculation of affordability. These extras include fees, such as taxes, bank charges and other additional costs, that could surprise you with an unwanted financial concern on closing day if you are not prepared!

Appraisal fee:

Your lending institution will request an appraisal of the property which can vary from upwards of $400 depending on the size of the property.

Land taxes:

Should be paid six months in advance and will be required to be paid on a pro-rata basis upon closing.

Structural survey fee:

If the home you purchase is a fixer upper or older property, the bank may request a structural survey — or you may feel you would like one. Typically, the cost of a full structural survey — structural, electrical and plumbing — comes in LESS than 0.2 per cent of the purchase price. So, with a $1 million home for example, the structural survey would be less than $2,000 (typically). The fee is based on square footage, the number of living units, pool, dock, etc and can be a small price to pay for peace of mind on an investment of this magnitude.

Property insurance:

Home insurance covers the replacement of your home. Your lending institution will request that you are insured and it protects their investment on the loan.

Service charges:

Any new utility service you hook up — such as telephone, cable or internet — may require an installation or set-up fee.

Legal fees:

Even the simplest home purchase should have a lawyer involved to review all paperwork. Shop around. Although there are bar association guidelines, costs can vary depending on the complexity of issues or experience of the lawyer.

Stamp duties on the conveyance:

These are applied whenever a property changes hands and are on a sliding scale depending on the value of the property. A note for first-time buyers in Bermuda. If you have never owned property before and the property you are buying is under $750,000, you are exempt from stamp duties. This can save you as much as $12,000.

Stamp duties on the sale and purchase agreement:

The sale and purchase contract must be stamped in order to be legal. The stamps are $25 on the original and $1 each on both the two copies. The original usually stays in the real estate agent’s office, and one copy goes to the vendor’s lawyer and one to the purchaser’s lawyer.

Mortgage loan insurance fee:

Depending on the equity in your home, some mortgages require mortgage loan insurance. This type of insurance will cost you between 0.5 per cent and 3.5 per cent of the total amount of the mortgage. Usually payments are made monthly or annually (in advance) and are in addition to your mortgage and land tax payment. The policies are actually almost identical to term life insurance.

Mortgage broker fee:

A mortgage broker (or bank) is entitled to charge you a finder’s fee in order to secure you the money and make arrangements for the financing. This fee is usually 1 per cent of the mortgage value.

Moving costs:

The cost for a professional mover can be in the range of $100 upwards per hour for the truck and additional for each extra man hour. This fee can be higher at weekends, evenings and on public holidays.

Maintenance fees:

Condos charge monthly fees which generally cover things like building insurance, exterior maintenance, exterior painting roofs and walls, and upkeep of common areas. These can range from $300 per month to more than $1000 in some of the more luxurious complexes. So be sure they are part of your budget.

Water quality certification:

If you have any doubt as to the quality of the water, either in the tank or coming from a well on the property, you should have it tested by the Ministry of the Environment. There is a small charge. Depending on the results you may need to have your tank emptied, cleaned and repaired.

Some of these costs are one-time fixed payments, whilst others represent an ongoing or monthly or yearly commitment. Not all of these costs will apply in every situation however it’s better to know so you can budget properly. Remember, buying a home is a major milestone. Whether it’s your first, second or tenth home, there are many important details to address. The last things you need are unbudgeted financial obligations cropping up hours before you take possession of your new home, so talk to your real estate agent about additional costs in advance.

•Heather Chilvers is among Coldwell Banker Bermuda Realty’s leading sales representatives. She has been working in real estate for 27 years. If you have a question for Heather, please contact her at hchilvers@brcl.bm or 332-1793. All questions will be treated in confidence. Read this article on Facebook: Ask Heather Real Estate