Buyer'sCosts

 

ClosingCosts to Consider as a Buyer

 

What fees will you be responsible for before or on closing day?

 

Buying a home can be hectic. You’re coordinating meetings, arranging for financing and the house inspection, and making moving plans – all this and more on top of your usual responsibilities. In all the commotion it can be easy to forget budgeting for closing costs. These are fees owed on, or by, closing day that must be paid for your house purchase to be complete. Most of these fees are in addition to, and separate from, your mortgage loan (although some closing costs can be tacked onto your mortgage).

 

Here are some of the items to consider budgeting for when purchasing – they may vary by region, and are prone to frequent changes. We can help you further define more precise numbers.

 

  • Mortgage Application – Typically not more than several hundred dollars. Due at the time of application.
  • Home Inspection (suggested) – Usually around $380-450  this may be one of the subjects to finalizing the sale of your home, and will be done fairly soon after an accepted offer. 
  • Property Appraisal:  - Most financial institutions will require some level of certified appraisal from an accredited certified appraiser, depending on the estimated loan to value ratio, and your overall personal credit score.  Sometimes this is paid for by the lender, sometimes by you.  You may want a appraisal as part of your conditions for sale.  Costs will depend on the type of property and value, you can expect $350-500 for a typical residential property, but more for more specialized properties and commercial.
  • Other Inspections:  Every home and property is different and requires different items to look for.  Shawn will help you determine what to look for.  Just like taking a car into a mechanic, you may need to have a variety of testings and evaluations done, and it may differ from property to property.  These evaluations may cost in the short term, but are worth it in the long run, as a missed step can cost you thousands of dollars in the future.  This may include well evaluations, water tests, sewage system tests, asbestos or hazardous materials testing, environmental testing, easement searches, building bylaw infractions, encroachments, structural engineering tests, slope stability testing, electrical/plumbing, h/vac, pool or hot tub evaluations, roofing evaluations, etc..  most of these require professional evaluations, and are paid for services.  Better to know what you are getting, than getting a surprise down the road.  Shawn is a Real Estate professional and can help guide and protect your interests as you consider purchasing.  Varying fees generally due upon evaluation.
  • Legal Fees (including disbursements) – Expect to pay between $750 and $2500 for a real estate lawyer or notary.  The cost varies depending on the extent of services provided, whether it is freehold or leasehold purchase, strata purchase, extent of encumbrances on title, amount of financing you are obtaining, etc.. This is due at closing.
  • Provincial Property Transfer Tax – In BC, sometimes called the “sunshine tax”, it is 1% of the purchase price up to $200,000, and 2% on the balance.  This is payable on every purchase of Real Estate, new or used.  For qualified First time Canadian and BC Buyers, there are some whole or partial exemptions available, that you may qualify for, if the property price is $425,000 or under.  FIRST TIME BUYERS explains this more thoroughly. 
  • Goods and Services Tax and the Harmonized Sales Tax:  Effective July 1st, 2010, the new Harmonized Sales Tax comes into effect.  While in general, the HST does not apply directly to used housing purchase, it will affect services you may acquire for your inspections, lawyers, etc..  As it is usually the Seller who pays Real Estate commissions, this will not affect your costs.  The type of property you purchase may have HST applicable, especially if it is brand new, a short term rental (property allows daily or weekly rentals), and some commercial property.  There are some large and small rebates available, and ways to deal with taxes like this, but as this is new, Buyer’s are advised to refer to their respective lawyers and accountants, and Revenue Canada for the exact application and applicability of this tax, rebates and exemptions. 
  • Various Registration Fees (including title /mortgage and governmental) – Several hundred dollars and up. Due at closing.
  • Annual Property tax adjustments – Property tax is paid July 1, 2010 mid way through the year, for that year, by whoever owns the home at that time. The lawyers will credit or debit you for that year’s payment, depending on if you buy the property before July 1st or after July 1st.
  • Pre-Paid Utility Adjustments:  If your property completes during a time when the fees have been pre-aid by the Seller, the lawyers will adjust the amount due on closing by credit or debit for the respective time used by either party.
  • Mortgage Default Insurance – For higher ratio mortgages, generally 75-80 percent and over, mortgages require insurance, secured by one of a number of insurers (EG. CMHC, Genworth, etc.) The amount depends on how much financing you need relative to the price, and can be anywhere from 1.00% to 3.25% of the principal amount of your mortgage. See your lender for the exact amounts.  Many times the financier will allow you to put this amount on top of your loan amount.  Due at closing.
  • Property/Fire Insurance – Expect to pay $300 to $700 for most properties, but it varies according to coverage level, region and property type. Due by closing.
  • Survey Certificate and/or Title Insurance – If the Seller does not have survey certificate, or there isn’t one of file with the municipality, most Banks and financial institutions will require one or both of these on the property, with costs of about $300-500 for a survey certificate (done by a local surveyor and is a plot plan showing the exact location of property pins, and the relative placement of the buildings on the property).  Title insurance ensures you are getting good title on your home, and is required by many lenders and suggested by many lawyers.  Price is generally a percentage of the purchase price for title insurance.  Due on closing.
  • Movers - This cost depends on what you have at your disposal for transport, manpower and involvement.  You can pay for the whole package from packing, loading, unloading and unpacking by high end movers, or choose to get Uncle Bob and the boys for free!  Royal LePage has affiliate movers that can give you a good discounted price.  Due upon moving.  May require a security deposit.
  • Utility hook ups:  There may be additional costs depending on the utility hook ups you desire - cable, telephone, satellite, internet, water, gas, to name a few.  This depends on the local providers.  HELPFUL MOVING TIPS will provide you with a list of phone numbers and websites. 
  • Home Repairs and Reno’s:  (optional) Sometimes the best time to renovate, upgrade, repair or paint is before you move in.  A through plan, timeline and priority list should be itemized ahead of time, so once you have possession, you can quickly get your desired trades in to do your work.  Shawn has a list of various professionals who are exemplary in their work, and would be happy to give you some referals. 

 

As you can see, there are many costs in Buying a property, and this it totally normal and expected.  One needs to go into things with your eyes open and be aware and realistic, but the benefits are worth the costs!  How many of us wish we had bought Real Estate 30 years ago?  ...it seemed expensive then too, but wow was it worth it! 

 

You can also use our MORTGAGE CALUCLATOR to help you in considering your costs and final payment schedules.

 

SHAWNWORSFOLD

REECEWORSFOLD


shawn@swproperties.ca

250.870.7771

 

Hon B. Sc, Realtor ®

Unlicensed Assistant


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