A big part of a mortgage application involves assessing what clients can afford in a home based on their current income and assets. However, that doesn’t just involve the home purchase price and the down-payment…it also means talking to clients about closing costs. Often this is a topic they aren’t very familiar with, yet it’s critical to understand in order to avoid any last-minute surprises or worse, having the deal fall through. Let’s break down just exactly what you can expect to pay when you purchase a home, cottage or condo – above and beyond the price in your purchase agreement.
Your home will need a formal inspection to ensure it’s safe and soundly built, with no major issues that could cause expensive repairs down the road. Your home is a big investment; you’d hate to miss this step and find out after you’ve bought it that your home has a significant problem for which you’re now on the hook to pay. Professional inspectors look for all and any issues with a property that most of us wouldn’t know how to uncover on our own.
Most people know that their home and contents need to be insured for such things as fire, theft, natural disasters and general liability insurance. However, there are other types of insurance that may be needed depending on the circumstance. For example, Canadians who don’t have a minimum of 20% for a down payment need to pay for mortgage insurance. Further, if you are purchasing an older home, you may want to look into title insurance as it protects buyers from losses that stem from issues such as liens against the property, survey errors or encroachment issues.
It’s highly recommended when buying any property to hire a reputable real estate lawyer; they scrutinize your purchase agreement, surveys and all related documents to make sure there are no errors or red flags. They also make the entire closing process easier by doing most of the legwork so that everyone gets paid and you get the keys!
Land transfer & other taxes
Land transfer taxes are typically the costliest closing expense. This particular tax is paid out to the provincial government and is based on the value of the home (through your municipal assessment). The more the property is worth, the higher the tax. A home worth $500,000 in Barrie would have a land transfer tax of approximately $6,400. If you’re a first-time home buyer however, there’s great news: You’re likely eligible for a refund of up to $4000! Another tax to be on the lookout for is the GST and/or HST – but only if you’re buying a brand-new home or condo. Find out in advance from the builder, your realtor or lawyer if you’ll need to cover this added expense.
You may have noticed that real estate fees weren’t on this list. That’s because as a home buyer, you don’t pay your realtor directly; their commission comes out of the money you paid for your new house. It’s the seller who pays out approximately 3% – 6% of the purchase price (whichever they’ve negotiated) which is then split between the listing and buying agent.
Your home purchase is a special but busy time and shouldn’t come with any unwelcome surprises – financial or otherwise. That’s where I come in; as a certified mortgage broker with many years of experience, it’s my job to guide you through every step of the home-buying process and offer solid advice along the way. Connect with me and let’s get started on your mortgage application – your dream home is out there waiting for you. Give me a call at 705-315-0516. I’m here to help and I love what I do.