How to Budget for Closing Costs
Over and above your down payment, there are always last-minute costs such as legal fees, appraisal fees, moving expenses, and house insurance to pay before you are finally a new homeowner.
These are known as “closing costs”, and there are some that you simply cannot avoid or lessen, as they are legally required and often fixed at a particular rate or charge. The time to budget for those “end” expenses is now. You must be prepared to pay most, and perhaps all, of the following costs.
Property Purchase Transfer Tax
Some Provincial Governments impose a Property Purchase Transfer Tax (PPTT) which must be paid when a property is legally transferred to a new owner. Each Province has there own formula.
Goods and Services Tax/Harmonized Sales Tax
If you are purchasing a new home, you may be subject to GST/HST on the purchase price. Most Provinces will reduce the GST/HST if the purchase price is under a certain threshold. Check your Provincial Government Web Page for details.
Legal Fees
The transfer of property ownership from the seller to the buyer must be recorded in the Land Title Office. Only a lawyer or notary can act on your behalf during the completion of your purchase. Legal fees for this service typically include a registration fee, disbursements, and a fee to prepare and register the mortgage documents.
Property Tax Adjustment
Of the current owners have already paid the full year’s property taxes to the municipality, you will have to reimburse them for your share of the year’s taxes.
Home Inspection Fee
A property inspection includes a check of all the major components of a building – roof, foundation, insulation, plumbing, heating, and electrical systems are all properly tested and examined. Not only do inspectors catch things you may have missed, but they also provide a detailed, written inspection report. CIBC will pay up to $500 for home inspections in most places in Saskatchewan.
Appraisal Fee
Lending institutions require an appraisal of the property before giving you your mortgage funds; it will be your responsibility to pay the appraiser’s fee.
Title Insurance
The lending institutions may also require Title Insurance (which has now replaced a Survey Certificate in most cases) to formally establish the boundaries of the property and to ensure that all buildings are within those boundaries.
Mortgage Default Insurance
A high ratio mortgage allows borrowing more than 80% of the purchase price of the new home. In most cases, the premium is added to the mortgage amount, however, if you can pay the premium upfront, do so now – it could save you even more later.
Life and Disability Insurance
As you take on any new debt, you should always consider your insurance protection needs, especially if you have a young family. You could purchase protection from your lender, however, in most cases, you would be better off speaking to an insurance agent/broker.
Fire Insurance
The mortgage lender will insist that you purchase an insurance policy that guarantees that, in the event of a fire, the lender will receive the balance owing on the mortgage before you receive any insurance proceeds.
Budget Your Closing Costs by downloading our Closing Costs Worksheet
Have questions? Give us a call today (306) 244-7755 or email us at devinandwes@yourmortgagenow.ca.
