Our clients have found the perfect place to purchase and now they are thrilled with the service we have provided. Unfortunately, we  need to shatter their wondrous illusion when we tell them about the hidden costs of purchasing a home.

Hidden costs seem to be an unpleasant fact in business these days and they apply to the real estate and mortgage industries as well. The issue of hidden costs may be more critical for first-time home buyers .

Fixed-rate mortgages – the kind obtained by two-thirds of Canadians – there are “shocking” hidden costs to those who need to pay out their mortgage early.

As it now stands, the major banks can get away with big penalties because they do not have to disclose their method of calculating mortgage penalties.

Here, is a list of more unusual or lesser-known costs:

Mortgage application fee --Some lenders may charge a fee to process your mortgage application. However, with the highly competitive nature of the mortgage industry, many will waive the fee entirely, especially if you have other accounts with them.

Mortgage broker's fee -- If you use a mortgage broker to find you a lender, you may be charged a fee which is payable at the time of closing when the mortgage transaction is complete. In many cases, brokers are paid directly by the lenders, so you should ask the mortgage broker about who pays the fee.

Mortgage insurance -- If you have a high-ratio mortgage, the government requires that it be insured against default and that you pay the cost of insurance. The cost to you is added to the mortgage principal.

Property and title insurance - Besides high-ratio mortgage insurance,  mortgage lenders require your client to have property insurance in place. This insurance covers the cost of replacing the structure of your home and the premiums depend on the value of your home, according to CMHC. The lender may also recommend title insurance. Remember, Title Insurance does not cover the property boundaries. So waiving a Survey is not always recommended.

Appraisal fee -- While it’s beneficial to know how much any prospective house your client is looking at is worth in order to negotiate price, home appraisals are also used to protect the lender’s interests. It’s likely a lender will ask for a recognized appraisal in order to complete a mortgage. However, some lenders will pay for the appraisal fees to get the business.

Home inspection -- an independent look at the house and property can cost in the $300-500 range for most single-family homes. Home inspections are recommended to identify if there are any other potentially costly expenses – issues not visible to the naked eye – that may impact the costs and upkeep of the home.

Property survey -- always a good idea, but not always carried out.  A land surveyor can make sure the buyer is getting the property they think they are buying.  A surveyor can properly install property markers on the corners of the lot.  With those, the buyer will precisely know the boundaries. 

Water testing -- for properties not on a municipal water system, most - if not all - financing institutions require the water source to be tested to ensure it meets standards for human consumption.  Some areas also have compounds in the water the prospective buyer may wish to know about. 

Status certificate fee -- When making an offer to purchase a condominium, it’s a good idea to ensure an offer is conditional upon obtaining and having time to review an Status certificate. This fee applies when buying a condominium or strata unit and could cost up to $100.

Land transfer tax -- Land transfer tax is specific to each province and is a percentage of the purchase price.

Legal Fees -- A lawyer will help protect your client’s legal interests and negotiate the terms of any offers made. Legal costs will depend on the complexity of the transaction and the lawyer’s experience.

Prepaid property tax or utility bills  --  If a closing date is mid month, a seller may have already prepaid taxes or utility bills. Buyers should be prepared to reimburse the seller for prepaid property tax and utility bills should they request it.

There are a number of other costs associated with buying a home, some that are well known and some that may be more "hidden".