When Buying Your Home Don’t Forget About Closing Costs!

When your buying your home, you can get so excited about your new place you overlook a few costs that could be related to your move.  Closing Costs are costs that COULD be related to your purchase.  Lets have a look at some of those costs:

DOWN PAYMENT – Not really a “cost” but of course if you are saving for your down payment, this would be one thing that would come out of your account.

APPRAISAL – Most mortgage companies do not need a full appraisal anymore on a standard mortgage. If you do need an appraisal the fees for this could range from $350 – $550. Some banks have access to a table top appraisal that they can do for no charge up to $100. If you have a mortgage with less than 20% down, then any appraisal costs are usually covered by your insurer.

REAL PROPERTY REPORT (RPR) OR TITLE INSURANCE – A RPR is a map of the land that shows that no permanent buildings on your land are encroaching to the neighboring areas. The seller of the property would usually have a copy of this but if not, the cost for this is between $400 and $600.  Title insurance can sometimes be used in lieu of a RPR and can be purchased for $200-$300. Some banks will need Title Insurance on all transactions.

HOME INSPECTION – A home inspection is an optional thing for financing, but is recomended on all transactions. A home inspector will go through the home and look for any major damage that there is or was on the property. The will look at everything from you shingles to your foundation. The cost for these can range from $300 to $600. This little amount can save you lots in the future.

LENDER FEES – 90% of transactions will not have to worry about lender fees. These are usually on a transaction that includes a private lender that looks at deals that have “special circumstances”.  This fee can run anywhere from 1% to 4% of the purchase price. In Most cases this fee does not apply.

LEGAL FEES –  All purchase transactions will need you to use a Lawyer or Notary to register the Mortgage. Your lawyer will help you make sure you are aware of the legal aspect of both the purchase and the mortgage. This fee can range anywhere from $800-$1300.

HOME INSURANCE – You will have to have home insurance on your home before you get your mortgage funds from your lender. Simply calling your Insurance broker and setting this up for your possession date is all that is required. The cost for this can vary from $50 – $100 a month depending on the property.

PROPERTY TAXES – Depending on when your transaction has taken place there may be a property tax adjustment. Taxes in Red Deer are due at the end of June. for the year. If you purchase a property in November, the taxes have already been paid fro the year by the seller, therefore they must be reimbursed. If you were to purchase the property in March, the seller could owe you money for the time they have not paid for yet. The cost for this will vary depending on the taxes and date for the property.

INTEREST ADJUSTMENT – the interest adjustment usually only comes into effect if you move into a property on a date other than the first of the month. Most banks calculate their payments starting from the first of the month. If you get possession on the 15th of the month they will have you pay the interest from the 15th of the month to the 1st of the following month. Your regular payments continue from there. If this case comes into play, it is an interest only payment required.

MORTGAGE DEFAULT INSURANCE – This is an insurance that is required on any mortgage that you do not have more than 20% down. Some lenders will need it on other products over the 80% loan to value as well. This is a one time only fee, and can be added on to your mortgage. This fee ranges anywhere from 1% to 4% of the mortgage amount.

Not all the fees mentioned would be required on all purchases. Most banks ask that you show them that you have 1.5% of your purchase price to cover the closing costs. This is not saying that it will cost the full amount, but the banks require you to show the amounts.

If you have any questions please email me anytime. sbourke@regionalmortgage.ca

Follow me on Twitter at http://twitter.com/reddeermortgage for information on mortgages.

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