Are You Ready for Closing Costs?

It is not only the down payment that should be a concern for prospective Canadian homebuyers. Closing costs can come up to a not inconsiderable sum and may be as much as 4 percent of the selling price of a Canadian home. Those looking to buy a home need to account for the fees and expenses associated with closing on a home. In many instances, payment is required prior to closing.

Understand more about closing costs and the need to budget for specific fees before taking the steps to purchase a home.

For informational purposes only. Always consult with a licensed mortgage professional before proceeding with any real estate transaction.

Closing Costs: Deposit and Down Payment

Closing costs may vary depending on whether or not prospective buyers make a small down payment. When homeowners make an Offer to Purchase, a deposit of at least 5 percent may be required as a part of the closing costs, a payment which is expected at an earlier stage than the down payment. The deposit goes towards the final down payment when the sale of the house is finalized, but it is generally refundable to the buyer in the event that the transaction falls through.

A home inspection is often part of the Offer to Purchase and can be considered part of the legal and administrative costs that come along with buying a home. This inspection may run around $500 and is used for assessment of the state of the house. Agents often recommend getting a home inspection to a buyer. It can reveal potential issues such as mould, pest problems, structural damage, or repairs that may need to be addressed before buying a home or help a buyer reduce its price. However, there have been situations when home inspections have not uncovered all issues and when a report has included items that are relatively unimportant.

Closing Costs for the Canadian Home Buyer

Closing costs in Canada can include legal fees, home inspection fees, property valuation fees, title insurance and land transfer taxes. While some closing costs are mandatory, others may only apply in a particular situation. Know that:

• Those who have CMHC insurance will need to pay PST when closing on a home
• A payment of $100 to $300 is required for title insurance
• A minimum of $500 will be needed to pay for legal fees
• A land transfer tax and, at times, a municipal LTT will need to be paid

In some situations, a buyer may have to pay to test a septic tank or perform water tests. Speaking with a local agent can help one understand more about mandatory and situational closing costs that may apply. In addition to those fees mentioned above, the majority of individuals need to factor in costs associated with moving into a new home.

Closing Costs Which May Apply

Other incidental costs may come up prior to taking possession. The issue of property insurance may come up as when a previous owner may need to be reimbursed for some of the property taxes they may have already paid on a home. Prepaid utilities may also make for an additional payment to the previous owner. A seller's prepaid costs may make for adjustment costs for a contracted buyer, increasing the fees and expenses expected to be paid by a Glenmore home buyer.

Closing Day is the Final Step of the Homebuying Journey

Closing Day, for most homebuyers, is the long-awaited culmination of weeks or perhaps months of house-hunting, negotiation, financial reviews, occasional uncertainty and a great deal of planning. Typically, on closing day, the keys to the property are presented to the new owner, and the process of moving can begin.

Prior to closing (or settlement) day, lawyers for both buyer and seller will have prepared the required sale documentation to be signed by each party. It is the buyer's responsibility to arrange for a bank draft in the amount necessary to cover the agreed-upon sales price, as well as any required fees and adjustments to the contract amount. A settlement statement that details all the financial adjustments should be presented to both seller and buyer for inspection prior to the actual day of closing. Any disagreements or discrepancies must be dealt with in order to complete the closing.

Once all attestations and legal procedures are finalized, documents are registered, ownership is recorded in the buyer's name, funds are transferred, and the keys to the property are released to the new owner. Occasionally, problems occur at the last minute with a sale, but in most cases, closing day is uneventful and is the official "green light" for moving.

Before a buyer or seller can reach closing day, they have to navigate the various expenses of the homebuying process, including closing costs. Speaking with an agent and lawyer will allow one to get better acquainted with the types of costs paid by sellers and buyers when going through the journey.

For informational purposes only. Always consult with a licensed mortgage professional before proceeding with any real estate transaction.