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/information makes the difference/
Closing Costs
Now that you know what you can
afford, the next step is to determine the additional costs
of the home-buying process. According to CMHC and GE
Capital, one should have, in addition to the down payment,
at least 1.5% of the purchase price for closing costs (we
say 2-2.5%, just to be on the safe side). The costs vary
across provinces, and for that matter, cities.
Below you will find a brief explanation of these costs, yet
it may not include all items required specific to your
property, or the area in which you have purchased. This is a
guideline, but your lawyer can provide a fairly close
estimate, and is the best resource.
Appraisal Fee:
The appraisal provides the lenders with a professional
opinion of the market value of the property. This cost is
normally the borrower's responsibility and it ranges as low
as $100 for a drive-by appraisal to as much as $200 for a
full appraisal, and the average being $175, plus G.S.T.
Occasionally, the costs could be slightly higher for larger,
custom-built homes, or homes in remote parts.
Home Inspection Fee:
A professional inspection of the home, top to bottom, is for
the benefit of the buyer, therefore, that's who absorbs the
cost. A typical home inspection can cost anywhere from
$250-$350, but our opinion is that they are well worth the
investment. New home buyers may not worry about it, but a
definite must for buyers purchasing properties older than 5
years. When hiring a home inspector, make sure the inspector
has liability insurance, just in case a mistake is made.
Fire Insurance:
All mortgage lenders will require a certificate of fire
insurance to be in place from the time you take possession
of the home. The amount required is generally at least the
amount of the mortgage or the replacement cost of the home.
This cost can vary on the property size and extras being
insured, as well as the insurance company and the
municipality. The cost can vary anywhere from $250-$600 for
most properties.
Land Survey Fee Or Title Insurance Fee:
A recent Survey of the property is usually required by the
lender, and if one is not available, it normally costs
anywhere from $600-$900 for a new survey. In lieu of the
Survey, most lenders today will accept Title Insurance, at a
much lower price of approximately $225.
Legal Costs and Disbursements:
A lawyer or notary will charge a fee for their professional
services involved in drafting the title deed, preparing the
mortgage, and conducting the various searches. The
disbursements, on the other hand, are out-of-pocket expenses
incurred, such as registrations, searches, supplies, etc.,
plus G.S.T.
Land Transfer Tax:
Most provinces charge a land transfer tax, payable by the
purchaser, and the amount varies from province to province.
This tax is based on the purchase price (refer to mortgage
ABC's for exact calculation).
New Home Warranty:
In many provinces, new homes are covered by a new home
warranty program. The cost to the purchaser for this
warranty is approximately $600 and should the builder
default or fail to build to an agreed-upon standard, the
fund will finish or repair the deficiencies.
Mortgage Application and Processing Fee:
On a high-ratio insured mortgage (mortgages above 80% of the
purchase price), the mortgage insurer (CMHC or GE Capital)
charges a fee of $165-$185 for applying and processing the
file, as well as appraising the property. On new homes, this
fee drops to $75.
Closing Adjustments:
An estimate should be made for closing adjustments for bills
that the seller has prepaid such as property taxes, utility
bills, and other charges. Any bills after the closing date
are the purchaser's responsibility. Your lawyer/notary will
let you know what they are exactly once the various searches
have been completed.
G.S.T.:
On the purchase of a newly constructed home, GST is payable,
but make sure you know who pays this, you or the builder.
Therefore, on the offer, the purchase price will say "Plus
GST" or "GST Included", and who gets the GST new home
rebate. A lot of builders have included this cost into the
purchase price so that the buyer does not have to come up
with that at closing. (As well, this tax is also charged on
all professional fees).
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