Budgeting for closing, moving and move-in costs

The fees and costs associated with buying a home, closing on it, moving—and moving in—can add up quickly. As you go through these steps, there’s a good chance you’ll have a number of questions. These questions might include:

• What are closing costs?
• How much of a down payment do you need?
• Are you hiring movers or renting a truck?
• What will you have to buy after you move in?
• How do you successfully plan for—and pay for—all these costs?

Closing costs explained

Closing costs are one-time fees associated with the sale of a home, generally provided to the buyer for payment three days before the home purchase is finalized. Most experts agree you should try to set aside roughly 3% of your home’s purchase price to cover closing costs.

While the down payment and mortgage default insurance are considered closing costs, they are not factored in for purposes of the 3% calculation. It’s also good to note that mortgage default insurance, typically required if your down payment is less than 20%, can be factored into your mortgage payment, to help you avoid having to pay it all upfront.

The cost of homeownership

After moving into your new home, you’ll learn quickly that there is always something to buy. Some purchases may be needed on day one, some after you’ve lived in your house for a couple months. These purchases could include new appliances, carpeting, lighting, paint, window treatments, a furnace, a security system, home insurance, mortgage life insurance, or seasonal items like rakes, shovels or a snow blower.

The importance of budgeting

Creating a realistic budget in advance and sticking to it can help you be more confident at the closing and avoid unexpected surprises down the road. The more you can map out—and spread out—your expenses and payments, the more effective you will be in managing your overall costs. But before you can put together an accurate budget, you need to know how much you can afford.

Another budgeting tip you may want to consider: Many real estate and mortgage experts recommend setting up a separate account to help you more easily manage funds earmarked for closing and moving costs.

Managing all your costs

If you’re planning to work with a real estate agent, lawyer, movers or other professionals, you may want to get a detailed estimate from them early on. This can help you determine how much these outside services will cost ahead of time so you can begin to set aside money for these additional costs as well. Being aware of and closely tracking every expense from every source is a great start to creating a realistic budget that can help you account for and meet all your financial obligations.

Speak to a mortgage specialist for help identifying and sorting out the many costs associated with closing, moving and moving into your new home.

All residential mortgages and lending products are provided by Royal Bank of Canada and are subject to its standard lending criteria.