Figuring out your optimal house price, best interest rate, mortgage and mortgage payment plan compose the majority of cost calculations regarding the purchase of your home. This said, there are a few other up front closing costs that a buyer must be aware of when taking into consideration the total cost of home purchase. Closing costs will vary depending on the type of mortgage you are closing as well, weather it is a home purchase, renewal or refinance/debt consolidation.
This article will take care in reviewing the most common closing costs, costs that you can help minimize by working with a knowledgeable and experienced mortgage broker. Remember, in most cases the services provided by a mortgage broker are completely free.
Lawyers Fees and Other Legal Fees: This is the most common type of closing cost that one will encounter. Lawyers are paid to do many things including, inspecting the mortgage documents for your best interest, deal with the sellers lawyer, handle the transfer of funds and register the property deed with the government. Depending on the type of mortgage, lawyers fees can run between $0 (for a mortgage renewal) to over $1000 (for a home purchase).
CMHC Tax:If your mortgage is insured with the CMHC or another mortgage insurer, HST must be paid upfront on the insurance premium total. Although the mortgage insurance premium itself, which can often amount to thousands of dollars, does not have to be paid upfront (it is included in the mortgage total), the tax on the CMHC amount does have to be paid up front. Usually this is a few hundred dollars.
Land Registration Tax: The rate is 0.5 percent on the first $55,000 of the price, 1 percent on the next $195,000, 1.5 percent on the next $150,000 and 2 percent on the balance. If you are a first time home buyer, the majority, if not the entire tax is paid for you.
Appraisal Fee: Some lenders will refund these fees after the mortgage has officially closed. Your mortgage lender may require that the property be appraised at your expense. An appraisal is an estimate of the value of your home. The cost is usually between $250 and $350.
Home Inspection Cost: If you are purchasing a home, an inspection can be a very good idea. The inspection usually costs around $400 but can give you a peace of mind that you are not going to incur major expenses down the road.
Estoppel Certificate Fee: Only if you are buying a condo and can cost up to $100.
These are the most common fees encountered when purchasing a home. As mentioned, a more qualified mortgage broker will help you fare better when dealing with these fees. A knowledgeable mortgage broker will know what to look for and who to refer you to, so you get the best service with the lowest fees.
See the CMHC ‘Homebuying Step by Step’ for a more comprehensive home buying guide.
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