What are my Closing Costs
The year 2020 has been off to an interesting start- the world as we know it has completely changed with the Covid-19 virus and the lockdown procedures placed in effect.
Many businesses and schools have had to close, leaving many families wondering how it’s going to affect them personally, with the biggest concern often being “how will I be able to pay my bills?” , or, “Am I able to defer my mortgage payments?” In times like these it’s important to act quickly and efficiently.
The process from prospective buyer to first-time home owner is often overly romanticized. It seems like a simple set of steps.
- Mortgage approval
- Securing funds
- Paying the seller
- Moving in
Closing costs are expenses associated with completing a real estate transaction. They arrive during the transfer of the title of a particular property, and vary depending on the location and value of the property being transferred. They can impact your offer, the size of your down payment and the amount of mortgage funds you qualify for.
Closing costs vary between 1.5 – 4% of the purchase price, and may include a number of other cash expenditures at various points in the title acquisition process. These include title insurance, home inspection, water quality inspection, appraisal and legal fees, PST on mortgage insurance and fire insurance. Condo purchasers should also be aware of the Condominium Estoppel Certificate or Status Certificate. Another additional expenses to be aware of are final adjustments. These are prepaid fees the seller is reimbursed for upon the date of closing(maintenance fees, heat, etc.). In some provinces, buyers are required to pay a land transfer tax, on the closing date. This tax is usually based on the purchase price of the property.
In regards to newly constructed homes in Ontario, the New Home Warranty program is mandatory. Provided by the Tarion Corporation, the coverage is good for up to seven years, and is usually included in the sale price of the house. However, some builders may separate this warranty at closing. (For information on the New Home Warranty program, click here).
Other costs which may not be accounted for:
- Moving expenses
- Deposits required by utility companies kitchen appliances
- Garbage cans, window coverings, new locks (varies depending on how many)
In order to truly understand the fiscal responsibility of purchasing a new home, an accurate representation of all costs must be achieved. Things like closing costs are crucial elements that must be accounted for, and can make or break a budget when selecting a new house. Use The Canadian Mortgage App to avoid overlooking additional expenses, and ensure you or your loved ones have a smooth transition from prospective buyer to homeowner.