Buying a home is rewarding and challenging at the same time. Aside from having to undergo a lengthy search for your dream real estate, it also entails significant financial preparation.

Typically, you must provide a down payment or earnest money deposit (1) to prove your intent as a buyer. Beyond purchasing the property itself, there are other expenses you need to cover, starting with regular mortgage payments if you choose to finance the property.

While these costs may seem overwhelming, sellers and realtors usually list them upfront so that you can prepare financially. Then again, you must also consider the hidden costs of buying a home. These expenses can add considerably to your overall homeownership cost.

We've listed the most common hidden fees below to help you stay ahead.

8 Hidden Costs When Buying a House

Hidden costs can catch you off guard and derail your financial plans, so it's crucial to research thoroughly and plan before purchasing a home.

Before purchase

1. Appraisal fees

If you plan on financing (2) a house, consider home appraisal costs. Lenders typically require home appraisals to determine the property's fair value (3) and establish your loanable amount. Depending on their requirements, lenders may request an appraisal fee to do the job or allow you to hire a licensed appraiser of your choice.

Are you buying a home in the Philippines? Appraisal fees go upwards of ₱10,000 depending on the property's location, lot and floor area, and the number of stories.

2. Home inspection fees

Before signing a contract to purchase a pre-owned or foreclosed property (4), examine it for any issues and concerns. You may also hire a professional inspector to comprehensively assess your prospective home while minimizing the legwork on your part. Inspections also ensure you get the most bang for your buck with your target property.

Regarding pricing, inspection costs vary depending on the property's location and size but expect prices to begin at a few thousand pesos.

During purchase

3. Closing costs

Completing a purchase entails making the following payments:

• Government fees and taxes

• Escrow account deposit (5)

• Attorney fee

• Title search fee

• Underwriting fee

With this number, your expenses can add up considerably. These fees also vary greatly, so saving money to cover them is crucial. Fortunately, you can request a closing disclosure (6) document for an itemized breakdown of the estimated closing costs to prepare your finances.

After purchase

4. Title registration fees

You must pay the government to register new land ownership and receive a title. This title establishes your rights and interest in the property, protecting your investment from possible ownership conflicts. The city or municipality's Land Registration Authority (LRA) processes title registrations.

Title registration fees vary depending on your new property's value, starting at ₱21 and reaching upwards of ₱10,000.

5. Move-in costs

Moving into your new home can be costly. These expenses include packing supplies, time off work, and hiring movers and vehicles to transport your items.

Given this cost's scope, you can only estimate possible prices. Expect figures to start at ₱1,500, but this increases depending on the required workforce, number of trips, transporting location, and vehicle size.

6. Taxes

Real property tax is an essential consideration when buying a home and land. Your local government unit imposes an annual or quarterly fee, which varies depending on your property's fair market price. Under the Local Government Code of 1991 (7) Section 233, real property tax rates must be no more than the following:

• 1% for provinces

• 2% for cities or municipalities within Metro Manila

You must also consider the tax of transferring ownership from the seller to you. According to Section 135 of the Local Government Code, transfer tax rates amount to no more than 50% of the 1% of the property's acquisition cost or market value, whichever is higher.

7. Renovation and repair costs

You might want to renovate your new house's layout according to your preferences or repair any breaks and safety concerns. Whether you plan to take the DIY route or hire a contractor, the job entails a significant amount based on your property size and the build quality you want to achieve.

For instance, renovating a duplex house for sale is generally more expensive than a detached one since you must account for your next-door neighbor's structure. To save money, consider making the renovations and repairs yourself. However, if you don't have the skills or time to do so, a contractor can set you back at least ₱10,000 per square meter.

8. Home insurance

While getting home insurance isn't mandatory, it protects your real estate investment and mitigates potential risks. Insurance covers your home and belongings if they succumb to theft, fire, or typhoons—which are all too familiar among Filipino homeowners.

Insurance costs depend on your property characteristics, insurance company, and policy coverage. For instance, policies don't typically cover water damage due to flooding, so be ready to pay extra to include it. Also, remember that insurance policies are annual contracts whose yearly renewals often have increased costs.

Prepare Your Finances for Homeownership

Homeownership comes with numerous hidden expenses that could catch you off guard if you don't account for them. On the contrary, understanding these costs prepares your finances and protects your bank account against surprise expenses to ensure a smooth transition into your new home.

Don't let hidden costs derail your homeownership aspirations. OnePropertee can help you find the best real estate properties for sale and take the first step toward acquiring your dream home.

Visit our website today!

Sources

1. Chen, James. “Earnest Money: What It Is and How Much It Is in Real Estate.” Investopedia, January 27, 2023. https://www.investopedia.com/terms/e/earnest-money.asp.

2. “What Is Financing? - Definition & Types.” Study.com | Take Online Courses. Earn College Credit. Research Schools, Degrees & Careers. Accessed June 22, 2023. https://study.com/academy/lesson/what-is-financing-definition-types-quiz.html.

3. Chen, James. “Fair Value: Its Definition, Formula, and Example.” Investopedia, April 26, 2023. https://www.investopedia.com/terms/f/fairvalue.asp.

4. Fontinelle, Amy. “Buying a Foreclosed House: Top 5 Pitfalls.” Investopedia, April 6, 2023. https://www.investopedia.com/articles/mortgages-real-estate/08/foreclosures.asp.

5. Banton, Caroline. “How Escrow Protects Parties in Financial Transactions.” Investopedia, January 19, 2023. https://www.investopedia.com/terms/e/escrow.asp.

6. Lee, Jeanne. “What Is a Mortgage Closing Disclosure?” Bankrate. Accessed June 23, 2023. https://www.bankrate.com/mortgages/closing-disclosure/.

7. “R.A. 7160.” The Lawphil Project - Arellano Law Foundation, Inc. Accessed June 23, 2023. https://lawphil.net/statutes/repacts/ra1991/ra_7160_1991.html.