Closing Costs: A Complete Breakdown with Costs

Closing Costs

Closing Costs #mortgagpug

Closing costs are, put simply the fees and payments a buyer must pay to complete a real estate transaction. It is important to know about these costs since most mortgage lenders will ask that you show proof of the funds. In addition to the downpayment, home buyers are suggested to budget for up-front closing costs of between 1.5% and 2% of the purchase price. 

Costs : Fees & Explanations

Outlined below is a list of the most common closing costs before, during, and at the end of the home buying process.

HOME INSPECTION

Any good realtor will recommend that you get a home inspection. Although not required there are some compelling reasons to have an inspection done:

  • There may be issues that need to be immediately or shortly addressed.
  • If the inspector finds any major repairs, the buyer may consider opting against the purchase or use the inspection to lower the negotiated price.

Cost: $400-$600

MORTGAGE LOAN INSURANCE

If you will be putting down less than 20% to purchase your home, it is a requirement to pay for mortgage insurance. Your mortgage insurance helps to protect your chosen lender against mortgage default, enabling you to purchase a home with a 5% down payment.

The fee will be up to 3.85% of your total mortgaged amount and can be either paid up front, or more commonly added to your mortgage amount. Mortgage insurance is provided by either Genworth Canada or Canada Mortgage and Housing Corporation (CMHC)

Cost: Varies

APPRAISAL

A professional appraisal is often required by the lender of choice to confirm a property's reasonable value if sold. This is to protect the lending institution and insure that the amount requested in the mortgage is in line with the value of the house and land. 

Cost: $250-$350

TITLE INSURANCE

In it's most basic form, the title insurance is used to protect the property title and right to ownership of land. When you purchase a home you gain the "title" or right to the land. Title insurance protects the lender for as long as you own the land against a variety of risks such as:

  • Fraud (someone taking your title through forgery or possibly fraud)
  • Rights of way
  • Encroachments (from neighbouring properties)
  • Unpaid liens
  • Etc.

There is only a one time fee to pay in order to gain title insurance for as long as you own this property.

Cost: For policies under $500,000.00, the cost is $250.00. For evey $1,000.00 in value over $500,000.00, the price increases by $.90.

LEGAL FEES

When purchasing, renewing or taking equity of your mortgage you must use a lawyer or notary who will charge a fee for their professional services. These services include preparing the mortgage documents, drafting a title deed, as well as conducting searches. 

Cost: $500-1200

PROPERTY TRANSFER TAX

In British Columbia, there is a land transfer tax based on the purchase price of a property which is payable by the purchaser. First time home buyers are exempt from paying this tax if the purchase price is less than $475,000 with a partial redemption up to $500,000.

New home purchases are also exempt of this tax on homes priced less than $750,000 with a partial redemption up to $800,000.

Cost: The PTT is charged at a rate of 1% on the first $200,000 and 2% on the remainder of the property's fair market value on the next $1,800,000 and 3% on balance above $2,000,000.

HOME/FIRE INSURANCE

Your lender will require you to show proof of home & fire insurance before completion of your mortgage. The costs to insure a property varies averages about $250-$600 per year depending on the property size, contents and other variables.

Cost: Varies

Would you like to know more about these costs, give me a call at 604-619-3319 or e-mail alex@mortgagepug.ca