Don’t Buy a Home … Part 5: Fee Disclosures

Fee Disclosures

Now, I'm not a real estate agent, but I think these are some key points to consider. 

As I’ve discussed here before, there are fees involved in purchasing units in a mutual fund. Any time I am doing a mutual fund transaction for a client, I am bound to disclose the costs, which can include transaction fees and trailer fees for managing the funds, through fee disclosures. This is in addition to the disclosures in a mutual fund’s Fund Facts, such as the MER or management expense ratio.

There are also expenses involved in owning a home. Not just in the obvious ways like the cost of purchasing or paying a mortgage, but in many hidden ways like property tax or possible increases to strata fees. There’s also maintenance. If you rent and the sink starts to leak, that’s the landlord’s responsibility. If you own, you’ll be footing the bill for the plumber or roofer or appliance repair technician.

Even in a strata where a group of owners pay into a replacement and reserve fund through their strata fees, unexpected costs can pop up. Ninety percent of stratas in B.C. could be facing the problem of too-low contingency funds. I have a number of clients who have been hit with $20,000+ special assessments because their strata hadn't set enough money aside to pay for major repairs.

And while your purchase price is fixed (and by extension, the value of your mortgage debt), your mortgage payment may not be. At the end of your 2 or 4 of 5 years when your current mortgage term is up, what will have happened with interest rates? If interest rates go up 1%, can you still afford your mortgage payment? What about 2% or 5%? Interest rates are at rock bottom levels these days and eventually they are going to go up.

Check back next week for the next installment in this real estate series: Sales Restrictions. You can also drop me a line to hear more.

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