Buying a House - Closing Costs
You will
incur some or all of the following costs when you
purchase a property and take out a mortgage:
SET UP & APPRAISAL FEES:
Conventional Mortgage -
approximately $185-$225
High Ratio Mortgage - approximately $235
This fee covers items such
as inspection, administration and appraisal. These fees
are paid at the time you take your agreement of purchase
and sale to your lender.
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PROPERTY TAX HOLDBACK:
With some mortgages, monies
are retained from the final mortgage advance to ensure
sufficient funds are on hand to pay any outstanding
property taxes be sure to inquire as to your Lender's
policy on this issue. Tax bills are paid bi-annually,
therefore, depending on the time of the billing period,
it could mean you might be required to have the cost
of one to six months of taxes available as part of your
closing costs.
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SOLICITOR'S FEE AND DISBURSEMENTS:
Legal fees vary. It is suggested
that you discuss fees with your solicitor beforehand
to be certain of your cash requirements. You should
also inquire as to whether the stated fee includes disbursements
such as
courier costs, title search, registration costs, etc.
Please note: Costs could possibly be covered by the
Government ifyou are employed by the Government.
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DEED TRANSFER TAX:
This tax may vary by municipality.
However, in some cities, the Deed Transfer Tax is 1.5%
of the purchase price. Example: On a purchase
price of $150,000, the Deed Transfer Tax would be $2,250
($150,000 x 1.5%)
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LAND SURVEY:
A survey of the property by an
accredited land surveyor is required. This is necessary
to establish that the property is located within the
specified legal boundaries and complies with local building
bylaws.
The survey cost is approximately
$400, but may be more if it is complex. It may be advisable
to discuss this requirement with your solicitor. A solicitor
who deals primarily in real estate may be able to arrange
for this service at a reduced cost. On an existing house,
ask your solicitor or Realtor to check with the present
owner to see if a survey is already available (most
lenders will accept the existing survey certificate
and you may be saved this cost, if you are prepared
to accept this). If a survey certificate is available,
there is no warranty by the vendor as to its accuracy
when passed on to a purchaser.
On employee relocations, the cost
of a new survey may be covered in the relocation policy.
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CLOSING ADJUSTMENTS:
When buying a house, be sure to
consider necessary adjustments between the seller and
yourself for such things as property taxes and fuel.
Your lawyer will discuss these costs with you.
Fuel adjustments are usually done
when the seller "tops" up the fuel tank prior
to closing and the purchase pays for a full tank of
oil.
Tax adjustments, i.e. the seller
has paid property tax to the end of the taxation year.
The property closes two months before the end of the
taxation year. There the purchaser rebates two months
taxes to the seller. Discuss with your lender at the
time of your mortgage application
what amount the lender will want withheld by the lawyer
on
closing for tax adjustment.
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PROPERTY INSURANCE:
You will have to maintain fire
and extended coverage insurance for the amount of the
outstanding balance of the value of the building, whichever
is the lesser. The cost will vary with property value,
insurance company, municipality, etc. Your insurance
broker can help out there Please notify your lender
and your solicitor as to who your
insurance company is, as well as the contact person
at the company.
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ACCRUED INTEREST:
Normally, mortgage interest is
calculated from the first of the month to payment date,
therefore when you close on other than the last day
or first day of the month, you will pay interest to
the first of the following month. For example, if the
closing date is May 20, you will pay interest from May
20 to June 1 (12 days).
Most lenders collect this on closing
date through the solicitor, therefore, you should be
aware of this amount and be prepared to pay this at
the time of closing. This may vary slightly if you have
chosen "other than monthly" payments. You
should discuss this with your mortgage counsellor.
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MORTGAGE LIFE INSURANCE:
This is insurance to protect co-owners
in case of death. Often mortgages are based on two income
earners. Should something happen, life insurance gives
your co-owner the protection of the mortgage being paid
off. Mortgage insurance can be obtained through your
lender or your insurance broker. It is wise to investigate
both avenues and compare prices.
Mortgage life insurance can be
obtained through your mortgage lender and be a small
monthly cost added into your mortgage. Mortgage life
insurance can also be obtained through any large insurance
company with a policy where you will pay a premium.
The advantage of this insurance is that once in place
it will cover your needs for the next many years no
matter which home you own, your age or changes to your
health.
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WATER TESTS FOR PROPERTIES ON WELLS:
It will be a requirement of your
lender for the water in a well to be tested for bacteria
and in some cases, they may require tests for other
chemical content. Water tests are usually done in conjunction
with
mortgage financing. As purchasers, you should be present
with your Realtor when the water samples are taken.
Water samples should be taken only in Department of
Health containers and returned to the Department of
Health as soon as possible. Should it be necessary for
the samples to sit overnight, it is important that they
be refrigerated. The cost of samples are as follows:
- ARSENIC (Environmental Chemistry)
- $8.50
- BACTERIA (Bacteriology) -
$12.00
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HST:
When applicable, check with your
lawyer or Realtor.
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