Understanding Mortgage Closing Costs
Many home-buyers are startled to learn that after they arrange their mortgage they have to pay a range of additional fees to finalize the deal. It pays to be informed of the specifics of closing costs so you can better prepare for unexpected expenses at such an important time. The exact closing costs will depend on how much you are borrowing, whether you are a first time buyer or not, your payment frequency and your closing date.
Below is a list of the majority of expenses associated with purchasing a home and obtaining mortgage financing. We recommend each of these items be considered and accounted for when preparing your home purchase budget. As every client is unique, so is every mortgage. Costs may vary depending on the mortgage application and not all of the items listed below would be required. Talk to us to help you with an accurate figure of costs.
Property Purchase Tax – In British Columbia, a provincial property purchase tax of 1% on the first $200,000 and 2% on the balance will be applicable. Use the PPT Calculator (courtesy of Spagnuolo & Company). If you are a first time home buyer, you are exempt from this tax up to $500,000. Between $500,001 and $525,000, the tax is calculated on a sliding scale.
Legal Fees – these vary across the country. Your real-estate professionals or we at Invis-Feisal & Associates can refer you to a lawyer or notary who offers a reasonable “legal package.”
Mortgage Appraisal Fees – on conventional mortgages & non-income qualified mortgages, lenders require a written analysis of the estimated value of a property, as prepared by a qualified appraiser. A fee is typically charged for a real estate appraisal because a home appraisal is time consuming to perform. Appraisal fees range between $99 – $300.
Land Survey – the legal written and/or mapped description of the location and dimensions of the land and where the home sits on that land is obtained from an accredited land surveyor. Approximate cost is $500. In many cases, a survey can be obtained from the previous owner or from city hall.
Title Insurance – may be purchased in lieu of a land survey and/or a well water test in some cases. Title insurance provides protection against several defects such as problems with the property that would have been revealed by an up-to-date land survey. Typical costs range from $150-$500. For more information visit First Canadian Title or Stewart Title.
Hi-Ratio Mortgage Insurance – If you are buying a home for less than 20% down, you will need to pay a premium of between 1% and 4.30% depending on the mortgage amount and amortization of the mortgage. This premium is to protect the lender in the event of default and is not to be confused with mortgage life insurance. For further information on hi-ratio insurance, please click the following links: Canadian Mortgage & Housing Corp (CMHC), Genworth Financial or Canada Guaranty.
Home Inspection Fee – a very important part of purchasing a home, the home inspection is an objective visual examination of the physical structure of the house. Approximate costs range between $300-$500.
Getting the Right Advice – The rules and regulations surrounding various mortgage fees are complex. We can guide you through the intricacies of these closing fees as they apply to your individual situation.
*Amounts and percentages are approximates only. For further information, consult your legal advisor and your real estate agent.
“Thank you for making this mortgage a reality for us. The personal attention you gave our account will always be remembered. Thank you.”
– Dan and Kate W.