Moving is always an exciting (and exhausting) experience. Whether you're relocating across town or across the country - Ã la Khloe Kardashian and Lamar Odom - you'll need to plan ahead and financially prepare for the task at hand. And while reality television stars may be immune to unexpected expenses, we average folk are repeatedly left scrambling for solutions when hit with hidden costs. If you're budgeting for a move, remember to take the following items into consideration.
1. Transfer fees
There are two types of transfer fees to consider when setting up your home. The larger of the two is the land transfer tax on your property. In general, if you purchase land in Canada, you are required to pay land transfer tax. This transfer tax is normally based on the amount paid for the land, in addition to the amount remaining on any mortgage or debt that is assumed as part of the purchase arrangement. Land transfer tax varies by province, so be sure to consult with your realtor during your purchase negotiations.
(Insider tip: If you're a first time homebuyer, you may be eligible to receive a refund for all or part of your land transfer dues as part of a government sponsored program. Talk to your professional advisor.)
How to estimate the transfer tax?
In most provinces, it's relatively easy to guestimate the approximate cost of the land transfer tax on a new property. In Ontario, for example, the calculations are as follows (source: Ontario Ministry of Finance):
0.5% of the value of the consideration up to and including $55,000,
1% of the value of the consideration which exceeds $55,000 up to and including $250,000, and
1.5% of the value of the consideration which exceeds $250,000, and
2% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single family residences.
So, let's say you've purchased a home for $200,000. The rate of land transfer tax on this property will be $275 on the first $55,000 (0.5% of $55,000) plus $1,450 on the remaining $145,000 (1.0% of $145,000) for a total of $1,725.
The second type of transfer fee to keep in mind has to deal with your utility services. Arranging for the transfer is easy; most companies now allow you to set up the entire switch online. Unfortunately, paying for the move is an entirely different animal. Gas and electricity transfers are normally reasonable, depending again on your location and moving timeline. Phone and Internet, on the other hand, can cost considerably more - sometimes as much as $250. The utility company will normally spread this charge over two or three bills as a way to soften the blow; however it's always best to be aware of these types of charges ahead of time so you can budget accordingly. A representative should be able to provide you with the estimated transfer charges over the phone.
2. Repayment schedules for the Home Buyers Plan
Many first-time homebuyers rely on the Home Buyers' Plan (HBP) in order to help fund their property purchase. This program allows individuals to withdraw up to $25,000 from a registered retirement savings plan (RRSP) in order to buy or build a qualifying home...which is all well and good until it's time to pay back the borrowed money.
The HBP repayment schedule begins almost immediately - just two years after purchasing your home. You are then required to pay back the full amount of the loan over a period of no more than 15 years. If you haven't already factored these costs into your monthly budget, it's time to rework your numbers.
3. Insurance
As if insurance wasn't expensive enough, moving can often cause an unexpected increase in your rates. This is especially true for single gals moving from an apartment to a single-family home or condo. The upgrade from renter's insurance to homeowner's coverage can be quite steep, so remember to check with your agent early on in the moving process.
If you're moving an entire home's worth of items, you may wish to consider purchasing moving insurance in order to protect your goods while in transit. All licensed long distance moving companies offer moving (also known as transit or cargo) insurance, so it pays to compare rates prior to booking a moving service. Coverage is normally available based on a tiered rating including basic, added value, and replacement value coverage. Of course, the cost increases with every level, so be sure to factor that into your budget. It's also worth noting that most moving insurance policies won't cover consumer-packaged cartons, only those that are packed by a professional mover.
Finally, if you're moving out of province, you may need to switch insurance providers entirely. This could include transferring your vehicle insurance policy, along with any life insurance plans. And as we learned earlier, "transfer" is often code for "cost", so don't be surprised if there's a fee for moving your coverage.
How much (more) to budget
If you're budgeting for a move, do yourself a favour and build in a cushion of about 15%. Hidden costs and unexpected expenses are bound to pop up along the way. Including a small financial buffer in your budget will help you to navigate these roadblocks with ease, resulting in a smooth and, dare we say, somewhat affordable move.
