Don't forget closing costs when buying a home
Despite the low cost of carrying a mortgage these days, 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. Here is a list of most of your major "closing costs."
- Legal fees: Since a lawyer is an essential part of your home-buying team, the work provided involves fees. Most legal fees include searching the title of the property, arranging a mortgage if necessary and handling other disbursements as required.
- Mortgage insurance and application fee: For any high ratio mortgage, which is any mortgage in which 75 or more per cent of the house's purchase price is covered by the mortgage, the lender requires mortgage insurance.
- Home Inspections: A Home/Property inspection is highly recommended for any purchase. This information may be critical in negotiations for items such as heating, electrical, roofing or moren that may result from the inspection not to mention piece of mind. Waiving this option is a big risk. Also some banks and lending institutions may require it. the cost for such is in the 400-600 range for an average home and may be higher for larger homes and acreages as well as commercial properties.
- Surveys: A Survey is highly recommended and will tell you what the property boundaries are insure you know what you are buying and where fences, pools, hedges, driveways, right-of-ways, easments etc are located. Without a survey of the property, it's anyone's guess where things are.
- Appraisal: A 3rd party Appraisal may be required by the lender and can cost anywhere from $300-600 for a basic home and go up from there. Make sure you ask your lender what the fee is and if it is included in the Mortgage for free or if there is a charge for it. Also some Buyers may find it a good idea to obtain one prior to removing Subjects as a confirmation of value.
- Mortgage broker's fee: A mortgage broker may charge a fee to set up a mortgage for you. In some cases the fee may be included with the legal fees if your lawyer arranges the mortgage, or included in the lender's fees if you deal directly with a lender such as a bank.
- Property 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.
- Land transfer tax: Anyone buying property in BC must pay a land transfer tax called property Purcahe Tax or PPT. It usually runs at 1% of the first $200,000 and 2% for evey dollar thereafter, depending on that price.
- GST: GST may be payable on the purchase price of properties, although in many cases a resale residential home may be exempt from GST. Various other closing fees, however, do involve payment of GST and as we are not accountants or experts, we insist that you get tax advice from an accountant before you make any decisions to move forward on the purchase of a property.
- Extra charges: You may also be required to pay the costs of such things as heating oil in the tank, septic pump0-out 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.
A Realtor can explain further details on closing costs. Just remember to add them to your financial plan when saving to buy a home.
Article Provided by: David Pusey Personal Real Estate Corporation