A common misconception when buying Real Estate is that it costs the buyer nothing. While it’s true the Seller typically pays the commissions, buyers should be aware that they will have other costs besides the down payment. These are called the closings costs. Items to consider are:
1. Property Inspection: It’s advised to inspect a property before finalizing any deal. An inspection will make you aware of the general condition of the property, to help you make an informed decision. It is not a guarantee. An inspection will cost approx. $400 depending on the square footage.
2. Property Appraisal: Generally required by the lender. It’s designed to protect the bank from over lending, as well as protecting the borrower from over paying. An appraisal will cost approx. $200.
3. Survey Certificate: Generally required by the lender. A survey will confirm that the house and/or garage, pool, fence, etc…do not encroach or cross over the property lines. A survey will cost approx. $250.
4. CMHC Application Fee: A $75 fee. I can’t call it much more than a convenience fee.
5. CMHC Insurance: Any purchase with less than 20% down (new April/2007) will have an insurance fee based on the entire purchase price tacked on top. A simple example would be a $100,000 purchase with 5% down ($5000) $95,000 x 3.25% = $3088. $95,000 + $3088 = $98,088 (Mortgage)
6. Legal Fees: A Lawyer or Notary will coordinate the transfer of money and title. Filing the required documents with the Land Title office. Expect to pay approx. $750-$1000.
7. Property Transfer Tax: This tax is payable on the purchase of property. The calculation is based on 1% of the purchase price up to $200,000 and 2% of any amount above $200,000. Most first time buyers are exempt from this if they meet certain criteria. The main criteria are; a) borrower has never owned a principal residence anywhere; b) maximum purchase price of $375,000.
8. Balance of Property Tax: Generally, property taxes for the calendar year are paid at the beginning of July for the full calendar year. The Buyer will owe the remaining tax for the year.
9. GST on New Property: New home buyers are subject to GST on their purchase, which will vary from 4.48% to 6%. The variation is determined by the price of your new home. If it is under $350,000 and is self-occupied the GST is 4.48%. If the price is over $350,000 a sliding scale is used to determine GST up to 6% at $450,000. Investors are subject to 6% GST at any price.
These are only some of the costs to be aware of. It is important to confirm your closing costs with your lender & later with your conveyancer to ensure there are no surprises. Your Realtor will make you aware of the fees, and give you a rough estimate, but when it comes right down to it. The lender and the conveyancer are charging you the fees, so they should make you aware of all the costs involved. Something else to keep in mind is that some banks waive fees when they know there is competition.