What Are Closing Costs?
You've found your dream home, the seller has accepted your offer, your loan has been approved and you're eager to move into your new home. But before you get the key, there's one more step--the closing.
Also called the settlement, the closing is the process of passing ownership of property from seller to buyer. And it can be bewildering. As a buyer, you will sign what seems like endless piles of documents and will have to present a sizeable cheque for the down payment and various closing costs. These fees associated with the closing can represent a substancial amount to buyers and should be calculated into the cost of buying a home.
As a responsible buyer, you should be familiar with these costs that are both mortgage-related and government imposed. Although many of the fees may vary by locality, here are some common fees:
Land Transfer Tax: Home buyers must pay a land transfer tax on property purchases. Qualified First time home buyers may receive a a "rebate". CLICK HERE to calculate the land transfer tax or Here is the breakdown of Tax rates on the value of the consideration as follows:
- amounts up to and including $55,000: 0.5%
- amounts exceeding $55,000, up to and including $250,000: 1.0%
- amounts exceeding $250,000, up to and including $400,000: 1.5%
- amounts exceeding $400,000: 2.0%
- amounts exceeding $2,000,000, where the land contains one or two single family residences: 2.5%.
Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process or your lender may pay this fee.
Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan or your lender or mortgage professional will include.
Private Mortgage Fee: This fee is typically for private mortgage lenders where the charge a fee for providing a mortgage. The fee is typically one-two percent of the total mortgage. Banks and Credit unions and other main stream lenders do not charge a fee.
Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.
CMHC Premium: If you buy a home with a low down payment (LESS THAN 20%) a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure (Power of Sale). CLICK HERE to calculate mortgage insurance premium fees.
Prepaid Interest Fee: This fee covers the interest payment from the date you purchases the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.
Property Tax: Many mortgage lenders will add monthly property taxes with your monthly mortgage payments as a convience so that you don't have to pay your property taxes separately. However this is usually an option that you can opt in or pay the property taxes on your own.
Legal Fees: You'll require the services of a real estate lawyer to complete the transaction. Your Lawyer will handle all the details, transfer documents, money transfer, titile insurance ect.
As real estate professionals we can advise you as to how much you can expect to pay for closing costs.
