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Closing Costs
Despite today’s attractive mortgage rates and wide selection of affordable homes from which to choose, you should keep in mind closing costs in addition to your down payment for that dream home. These various charges can add up and, for the most part, they are all legally required payments in buying a property. Some of them expenditures are one-time costs and others, such as condominium maintenance fees and property insurance, will be ongoing monthly expenses. The good news is that not all of these costs may apply in your circumstances.
These payments include:
- Legal fees: since a lawyer or notary public is an essential part of your home-buying team, the work provided involves legal fees. Most legal fees include searching the title of a property, arranging a property survey if necessary and handling other disbursements as required.
- Mortgage loan insurance: Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect the lenders against mortgage default, and enable consumers to purchase homes with little or no down payment. As with any insurance, there are insurance premiums to be paid. The amount of the premium varies and can range between .65% and 2.75% depending upon how much of the purchase price/home value is financed with a mortgage. Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.
CMHC's Mortgage Premiums (as of May 27, 2007)
- Appraisal fee: If your loan is not insured, your lender may require a property appraisal at your expense.
- Property/fire insurance: This insurance covers the replacement value of your home and its contents. Most mortgage lenders will require proof that you have this insurance before processing a mortgage.
- Home inspection: With resale homes, to check plumbing, electrical work and any structural flaws. A professional home inspector knows what to look for and can confirm or add to the information you have gleaned from the REALTOR® for your inspection.
- Renovation and repairs: A home inspection may indicate that the home needs major structural repairs such as a new roof. Don't forget to factor these costs into the price of the home.
- Survey fee: Lenders will want proof that the property complies with all relevant by-laws and that new additions fall within the property’s boundaries. See if the seller has a recent survey; the lender might accept it and you could save yourself some money. If you're obtaining title insurance, it may be an acceptable alternative to a survey. Title insurance
is an insurance policy you can purchase to protect your investment in your property if there is a problem with title.
- Property taxes: Taxes are always a certainty. If you have a high-ratio mortgage, your lender may require that you have your property tax installments added to your mortgage payments.
- Land transfer tax: A land transfer tax is assessed on real property when ownership of the property is transferred from one party to another. The tax is a certain percentage of the value of the property based on a sliding scale:
- 0.5% of the value of consideration for the transfer up to and including $55,000,
- 1.0% of the value of the consideration which exceeds $55,000 up to and including $250,000,
- 1.5% of the value of the consideration which exceeds $250,000; and
- 2.0% of the amount by which the value of the consideration exceeds $400,000 for land that contains at least one and not more than two single family residences.
- GST: GST is payable to some degree on the purchase price on all new homes, although partial rebates are available on the purchase of most homes. A resale residential home is usually exempt from GST.
- Extra charges: You may also be required to pay the costs of such things as heating oil in the tank or other costs incurred by the seller, but included with the house prior to the closing day.
- Hook-ups: There may be hook-up charges required for appliances and services such as telephone, TV cable, hydro and other utilities.
- Moving costs: Don’t forget the basic costs involved in moving from your old place into your new home, particularly if you use a professional moving company.
- Prepaid taxes or utility bills: You will have to reimburse the seller on a prorated basis if some bills have been prepaid beyond the closing date.
- Status Certificate: Along with its supporting documents, this outlines a condominium corporation's financial and legal state.
- Condominium fees: Monthly fees for common-area maintenance, such as grounds-keeping and carpet cleaning. Fees range widely depending on the type of structure but will probably be at least a few hundred dollars per month.
- Water quantity and quality certification: if you're buying a home with well service, you'll have to pay a fee to certify the quantity and quality of the water.A REALTOR® can explain further details on closing costs. Just remember to add them to your financial plan when saving to buy a home.
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This information is provided by the London and St. Thomas Association of REALTORS®.
The information herein is believed to be accurate and timely, but no warranty as such is expressed or implied.
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