Don't let closing costs catch you off guard
Purchasing your new home should be a super experience not a stressful one. Scrambling to come up with extra cash last minute or worse not being able to close is a Nightmare for everyone involved.
If you’re using a Bank or A Lender you might not even know that extra fees have been included into your mortgage amount.
Say you have $135,000.00 saved and have been pre-approved for a $765,000.00 mortgage. You’ve been eyeing a $900,000.00 Townhome that ticks off all the boxes on your dream list and you want to put an offer in. You email your Banker and the answer is YES! go ahead and purchase the house. What you may not know, is that because your down payment is less than the required 20% you’ll have to purchase mortgage default insurance. At 2.8% including HST, it costs about $24,000.00 and is added on to your mortgage.
You may not realize the added expense until you’re signing on the dotted line and it’s too late to make a change.
When the amount is included in your mortgage at today’s rates, you most likely will pay another 5.79% or more on top. Depending on the market i.e. if prices are rising it might be advantageous to buy sooner and pay later. If it’s a downturn you may want to look at all the pros and cons before you purchase. The cost for the extra 5% would be $45,000.00.
If you’re using a Mortgage Broker with alternative financing it’s possible that you may have to find the extra money or you won’t be able to close.
Other closing costs include:
- Home Inspection: $500.00 plus depending on the square footage
- Lawyer Fees: $500.00 – $1,200.00
- Title search and other registration fees: about $200.00
- Status certificate: $125.00 if it’s a condominium
- Appraisal fee: $500.00n – $800.00
- Land transfer tax: $14,750.00 (this amount is double in Toronto)
It’s worthwhile to note that if you paid more for your property than the Lender says it’s worth after the appraisal, the onus is on you to pay the difference as part of your downpayment. Also, in Ontario, Land Transfer Tax can’t be added to the mortgage.
A good idea is to choose a Realtor and Mortgage Broker who can guide you every step of the way. That’s where I come in! My experience allows me to offer suggestions and assist with your Home Buying Plan.
I recommend having 3 – 4% of the purchase price on hand for closing costs and other surprises.
Here’s a link to an excellent Buyer Closing Cost Calculator for 2023. It’s a great site not only for real estate questions but to help you make wiser financial decisions all-around.
Please Text / Call me at 905-399-7229 or email me at firstname.lastname@example.org It would be great to work with you and make your home buying experience an excellent one.
Don’t forget to check out my free local Facebook Group, Meet Me In Oakville. It’s a great place to connect with other community members and get weekly updates on the best events and happenings in and around town!