When you are ready to purchase your home it is important to be aware that it will cost you some money to complete the deal. There is nothing worse than going through the entire process and finding out that the costs of completing the transaction are higher than you thought.
Every lender will want to see that you have the funds available to pay for your closing costs. If you have a high ratio loan (less than 20% down payment) it is a rule that you have to prove you have 1.5% of the purchase price available to pay for this. Even though it may not cost you this much, it will be a requirement for the approval.
A fee will be required to assess the value of the property you are buying. If have 20% down or more, or happen to use an alternative lender, then you will have to have an appraisal done on the property to determine the market value. This appraisal fee can run you around $250-$300 depending on the property. If you put even less down then you pay about half as much to determine the value of your property.
You will also have to obtain either a site survey or title insurance on the property. In many instances the realtor or seller will have a survey that is valid to use. However, if there is not one available, then you will be responsible to have one done. Your lawyer or notary will make sure this is done for you and the cost of a survey is approximately $250. You can choose to have title insurance instead which is a little bit cheaper, but is a one-time thing (if you go to refinance your mortgage, you will need to repurchase this, whereas a survey would be reusable). On the other hand, Title Insurance also protects you against other eventualities, including mortgage fraud. Your lawyer or notary will should recommend the superior choice for your particular needs.
Most people choose to get a home inspection done to make sure the home has no major problems. This is not a requirement for financing, but it is a smart investment. Can you imagine buying a home and not having a home inspection done later to find out that there are major foundation issues that are going to cost you thousands of dollars to fix!! The cost of a house inspection is around $300 and will be worth every penny for the peace of mind. I strongly recommend having this done!
Although most of the time borrowers will not be charged lender and/or broker fees, in some instances fees will be charged. One example is private mortgages. In these cases usually broker and lender fees will be charged, but will be disclosed up front to clients. Brokers may also choose to charge fees for some deals and some alternative lenders have some form of application fees. But in most instances, especially for conforming deals, there are no fees charged to the borrower and the broker gets paid by the lender.
Another cost to be aware of is the legal fees you will have to pay to either a lawyer or notary for registering your mortgage. The cost for a purchase will be approximately $800-$1000 and often less for a refinance of your existing mortgage (not all of this goes to the lawyer/ notary). You will get a statement of adjustments from your lawyer/ notary outlining all the fees involved.
You will have to have house insurance in place before you get your mortgage. The reason for this is to protect the lenders security in case of fire or any other damage to the property. Expect this to cost approximately $50/month and up, depending on the property. Your notary or lawyer will make sure you have this in place before your mortgage closes.
In most cases, if you have a high ratio mortgage (less than 20% down) you will have to pay a mortgage insurance premium. This is a one-time premium that insures the lender against default of the mortgage. The mortgage premiums range from .50% to 2.75% for standard conforming mortgages, but can be higher for non-conforming deals. These premiums do not have to be paid up front, but you will have the option to do that. Most people choose to have this amount added to the mortgage amount. Some alternative lenders have their own application fees that usually can be added to the mortgage as well.
Often it takes ‘two of you’ to qualify for a mortgage so if something unforeseen should happen to one of you (death, disability, critical illness, or ‘loss of job’) you should obtain coverage to protect your ability to make your mortgage payments! Our Company ‘Home n Work Mortgages’ has an electronic brochure that is simple to read and easy to understand on the various coverages available. Ask for it and I’d be pleased to send it to you via email. The best time to obtain coverage is when you are arranging your mortgage financing.
When you buy a home, you will now have to pay the property taxes. Most of the time you can have 1/12 of your property tax payment added to your mortgage payment. With high ratio mortgages, lenders will most likely not give you an option, as they will want the taxes added to your mortgage payment. But if you have 20% down or more, you usually have the option to collect your own taxes or have the lender do this. If your mortgage closes after the taxes have been paid for the year you will have to have enough to reimburse the sellers for the length of time you own the home for that year. But if you close the deal before the taxes have been paid then the sellers must reimburse you for the months they have owned the home for that year. However, you will have to pay the entire years taxes by the beginning of July.
Purchase Tax amount varies from Province to Province. If you are a ‘first time’ homebuyer then you may be exempt from tax. Again, it varies across Canada so ask your notary or lawyer just to make sure. If you are required to pay purchase tax you will want to make sure you have enough funds available to cover this cost.
Finally, there is also GST on all new construction.
We wish to recognize this article contribution by Matthew Hines of the Home n Work Mortgages national network of mortgage consultants.
Under our ‘shared knowledge’ concept intellectual property is shared within our organization for all and recognition is given for the one making the contribution.’
Rebecca joins the team with over 20 years of business, investment and real estate experience. A true advocate for the consumer, Rebecca brings you unparalleled integrity with unbiased advice. Phone anytime and discover for yourself just how easy and enjoyable the mortgage process can be.
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rebeccaawram@homenwork.com
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