By the time you finalize the paperwork for buying a home, you’ll realize that aside from the down payment, which costs you tens of thousands of dollars, you also have to deal with some closing costs. The term “closing costs” is a comprehensive term that covers all the small and large legal and administrative expenses you incur when buying a home. In addition to the typical costs such as home inspection fees, lawyer’s fees, and land transfer taxes, you also have to pay various other charges.

Here are some of the important ones you need to factor in your budget.

Settling Prepaid Property Taxes

Property taxes are the charges you pay for municipal services such as libraries, fire departments, or police assistance. These extra charges become applicable when you buy the property. And, in case the previous owner has paid some of the property taxes on the house, you must reimburse the seller for the additional amount. Your real estate lawyer will help you figure out how much you owe.

For instance, say the previous owners have paid property taxes of $3,600 for a whole year and you close the house deal on June 30. Accordingly, you must pay the sellers an amount of $1,800 for the prepaid taxes for the upcoming 6 months when you’ll own the house.

Cost of Organizing Utilities and Other Facilities

Factor in the cost of arranging for utilities when you fix up a closing date. You may have to make arrangements for internet service, get water, power and home phone connections, and so on. Such services may cost you a one-time $50 to $100 fee for each setup. As a new applicant, service providers may request a deposit or ask to see your credit score.

Buying Off Furniture and Other Home Accessories from the Seller

Very often, when the seller accepts your offer to purchase and finalizes the sale, they may sell you some of the movable items in the house before he sells them in the open market. These items can include some pieces of furniture, window coverings, large-sized electric appliances, and any others the seller may not want to move with him. These additional items are termed as chattel.

Your real estate agent will likely include these items in a list that you can consider. For instance, say the seller has items like a deep freezer installed, dining table, or light fixtures. If you decide to buy it off him, you might incur additional unexpected expenses.

Organizing Security Systems and Replacing Keys and Locks

Once you move into your new home, you may find the need for additional home security measures that the previous owners might not have installed, like for instance, CCTV cameras for the lawn or garage. If you feel that these are essentials you absolutely need, you may need to incur the additional expense. Having received the keys to your new house, be aware that the old owners may have had duplicates made for friends, family members, caregivers, and neighbours. Considering that this can present a risk to your security, it is advisable to get the locks changed or rekey the locks. Getting a locksmith to rekey the locks is easy and takes only a few minutes. However, changing the locks may take a few hours. Make sure you have cash set aside for this expense also.

Moving and Settling in Costs

Moving houses involves not just packing up and moving boxes and furniture. It also involves unpacking and settling in. Even though you may choose to hire professional movers to help, settling into a new home and locale takes time and effort. For instance, keep in mind that you may not have the time to cook when half of your belongings are still packed in boxes. So, factor in the cost of takeout. Or, say, the furniture pieces you brought with you need adjustments so they fit in the new rooms or proper installation. If you need to call in a handyman to help, that’s an additional expense.

Planning for Unexpected Expenses

Aside from the expenses mentioned above, you may find that various other unexpected costs come up from the time you first estimate the expense of buying the house to the time when you actually place an offer, make the payment, and move in. Also, consider the minor expenses you may need to make when settling in.

A good rule is to set aside around 4% of the purchase price of the property. For instance, if your house costs $450,000, estimate that you’ll need at least $18,000 for minor closing costs. Once you have the funds saved up, you can dip into them each time you need to pay for an additional expense.