Closing costs are the expenses over and above the property's price that buyers and sellers usually incur to complete a real estate transaction. Standard charges like taxes, administrative fees, home inspection, property appraisal and survey, insurance, utilities, GST or HST are all a part of figuring closing costs incurred in Canada. As a general rule of thumb, you should budget at least 1.5% to 4% of the house purchase price for closing costs. For example, if you're purchasing a house for $600,000, you should have at least $9000 available for closing costs. Also, you will need to arrange 1.5% available for closing costs to qualify for a CMHC-insured mortgage. These closing costs are usually mandatory for all home-buyers.
This comprehensive step-by-step guide will walk you through everything you need to know-from preparation to follow-up-to ensure your open house not only draws crowds but converts visitors into serious buyers.
Most Common Types Of Closing Costs
Here is a list of some of the basic expenditures that comprise closing costs.
1. Land Transfer Tax: Almost all provinces have a Land Transfer Tax (LTT), which is a fixed percentage of the home's purchase price, payable on closing of the deal. The percentage of LTT is different for each province. First-time home buyers are exempt from paying land transfer tax in some cases.
2. Lawyer and Legal Fees: Hiring a real estate lawyer is a must, as they ensure that your legal documentation is completed and filed correctly and handle the transaction.
3. Property Survey: A land survey maps out a property's boundaries to know where the property ends and your neighbour's area starts. If there is no previous survey available, your mortgage lender will require you to get it done as the home-buyer.
4. Home Inspection Fee: A professional home inspection is a must, especially if you are first time home buyer in order to identify water damage, faulty wiring or plumbing, inadequate insulation and the repairs you can expect once you move in. While a home inspection is not mandatory, it is always recommended.
5. Title Insurance: Title insurance protects them against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and costs between $100 - $300.
6. Appraisal Fee: In a conventional mortgage setup, lenders will want to order an appraisal on the home you are buying to certify the resale value of the home in the case you default on the mortgage. Hence, an appraisal is performed, which usually costs between $250 and $350.
7. Government Registration Fees: Registration fees is valid for filing official documents with various government departments. It might vary by document, property type, region, and province. Your lawyer may include these costs in their overall fee or give you a list of these additional fees when you hire them.
8. Mortgage-related Fees: The closing charges associated with a mortgage include credit report fee, Origination fee, Application fee and Underwriting fees.
9. Real Estate Commissions: Borne generally by the sellers to their broker at the end of the sale, real estate commissions are also a part of closing costs. It is necessary to keep track of the commission rates in cases where you are both selling and buying simultaneously.
10. Property Tax: While figuring closing costs, expect to pay any local property taxes due within 60 days of the home purchase. Buyers might. If the seller has already paid property taxes in full for the entire year, you will need to reimburse them for the period you will be living in the house.
11. Estoppel Certificate Fee: The fee is applicable if you purchase a condominium or strata unit. Estoppel is a signed statement from the condominium corporation and is conclusive proof of matters certified in it. The certificate provides information about the specific condo unit and the condominium corporation.
Most online closing cost calculator, allow you include these & give you an approximate idea of the additional charges. You can also consult an experienced real estate agent or PREC like Rajinder Dhutti for the same.
How To Lower Your Closing Costs
Most of the closing costs are unavoidable, but there are some that can be negotiated, potentially saving you money. Here are a few tips:
1. Compare the Market: The competition is high, so you can choose the PREC & lawyers that suit your pocket.
2. Down payment assistance: If you're a first-time home-buyer, explore the government schemes, tax benefits, assistance and grants that can help you cover closing costs.
3. Lenders offering discounts: Consider choosing a mortgage lender that doesn't charge an origination fee or that'll provide you with a discount. You can even try asking your bank for a fee waiver since you're already a customer. Also, you may minimize your expenses like an inspection by choosing budget-friendly vendors
Even though the buyer bears the majority of costs at closing, the seller isn't entirely off the hook. The expenses paid by sellers include transfer taxes, attorney fees, escrow fees and title insurance.
It is essential to be prepared for such additional expenditures while planning your budget for your new home. Knowing about these extra spending helps you have a realistic estimate of the finances to be managed for the transaction and determine how much these outside services will cost ahead of time so you can begin to set aside money for these additional costs and enables you meet all your financial obligations. One can make use of the online closing cost calculators to get an approximate idea of how much amount they must assign for these extra expenses.
If you are still figuring closing costs on your real estate sale or purchase, contact Rajinder Dhutti PREC, renowned name among Abbotsford real estate agents, (link to website) for consultation or you can also use any reliable closing cost calculator to be prepared for these additional expenses.
Hi! I am Rajinder Dhutti PREC*, a realtor at Sutton Group, West Coast Realty. I have been working in the real estate business since 2013 with an intention of providing nothing but the best to the clients.
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2790 Allwood St Abbotsford,BC, Canada V2T 3R7
