Closing costs tend to be hidden costs when buying a home. The purchase price you negotiate when buying or selling a home, is just one part of the total cost for buying a home. In addition to the purchase price there are several other fees, known as closing costs – all of which you need to factor into your purchase price. Closing costs is not a set number, but a compilation of various administrative, legal and other one-time fees. These fees are of course due on the completion date.
Many first-time home buyers under estimate the amount of cash they will need for closing costs. Typically, you’ll want to budget between 1.5% and 4% of the purchase price of a resale home, to cover closing costs.
To help you plan the purchase of your property, we have included a short list of the extra fees you can expect to pay, once you’ve settled on the price of you new home.
Legal Fees: Legal/Notarial fees and Disbursements. The lawyer/notary is the person who goes through all the paperwork and makes sure that everything is legitimate and binding. They confirm that all the items that were agreed to by the buyer, seller/builder, and lender are written and worded correctly. Your legal representative should also be able to explain the various documents to you, so that you understand what you’re agreeing too. The costs can vary from $500 to $2,000.
Title Insurance: Title refers to the legal ownership of the property. The deed is the physical legal document that transfers the title from one person to another. Both the title and deed of the home, must be registered with a land registrar. Most lenders require Title insurance as a condition of granting you a mortgage. Your lawyer/notary helps you purchase this. Title insurance protects you from Title fraud, identity theft and municipal work orders, zoning violations and other property defects. Costs can very from $150 to $500.
Fire/Home Insurance: Mortgage lenders require that you have fire/home insurance in place by the time you complete the purchase of your home. Property Insurance covers your home’s replacement value, should anything happen to it. The amount required is at least the amount of the mortgage or the replacement cost of the home. Home insurance can vary from $400 per year for condos to $2,000 for larger homes.
Adjustments: An adjustment is a cost to you, to pay the seller, towards fees that the seller has prepaid for something related to the house. This could include property taxes, condo fees, utility fees etc. For example: If you take possession in the middle of a month, the seller has already paid for the whole month and you must pay the seller back for what they’re not using.
Property Transfer Tax(PPT): PPT in BC, is a tax charged to you by the province. First-time home buyers are exempt from the fee, if they are purchasing a property under $500,000. All home buyers are exempt if they are purchasing a new property under $750,000. In BC, the PPT is 1% on the first $200,000 or purchase, 2% over $200,000 and 3% on any value over $2,000,000.
GST: GST is a federal value added tax 5% on the purchase price of a new home. If someone has lived in the home, the home isn’t subject to GST. (There is a partial GST rebate on new properties under $450,000.)
Other Closing costs: Will you need new furniture? Carpets? Window coverings? Appliances? Are you hiring movers or renting a truck? Will you need boxes, bubble wrap and …!
The bottom line is, plan your expenses carefully when looking at a property and don’t forget to include these closing costs into your budget. If you have any questions, or you need assistance with the mortgage don’t hesitate to contact us.
Original Article: www.dominionlending.ca
