Many unskilled homebuyers fail to properly consider the need to set aside significant amounts for closing expenses. These costs are always in addition to the down payment and moving expenses, and they are usually due at the end of the transaction. Legal and professional expenses, taxes, appraisal prices, approvals, utility deposits, house inspection, and insurance all add up to thousands of dollars, and some of them cannot be “rolled up” into the loan. They are usually paid in cash at the time of closure.
Goods and Services Tax (GST) – When purchasing a residence that has not previously been lived in, the purchase price may be subject to a 5% GST. With the impending adoption of a harmonized tax or HST, in British Columbia and Ontario, the total tax might reach 13%. There are a number of exemption and rebate programmes available to reduce the burden of this tax, but the costs will still be a major portion of the entire purchase price. GST and HST do not apply to properties that have already been inhabited.
Land Transfer Tax – Also known as a property acquisition tax, this tax ranges between 0.5 and 2 percent of the entire cost of the residence. Outside of Alberta, Saskatchewan, and rural Nova Scotia, it applies to all Canadian real estate transactions. However, comparable but lower levies, such as land registration duties, are levied in such locations as well.
Property Tax – Because most property owners pay the entire year’s property tax to the appropriate municipality in advance, the purchaser must refund them for any unused portion.
Evaluation Price – Prior to approval, the majority of mortgage lenders will want a comprehensive expert appraisal of the residential property, and this fee is frequently the buyer’s burden.
Survey Fee – A survey certificate may be requested by the mortgage lender to legally identify the property’s limits and guarantee that no buildings breach those parameters or easements. If a current, acceptable survey does not exist, it is usually the buyer’s responsibility to pay the surveyor’s fees.
Mortgage Application Cost – Although this fee varies greatly amongst mortgage lenders, most charge a fee only to review the buyer’s mortgage application, which is often non-refundable if the application is declined.
Mortgage Default Insurance – If the loan is High in Ratio, or covers more than 75% of the entire purchase price of the house, this type of insurance is usually required before funding. The goal of this insurance is to cover any gap if the lender is forced to foreclose and the property does not sell for a high enough price to satisfy the amount owed. This premium is typically paid throughout the life of the loan.
Fire and Liability Insurance – Lenders usually ask that an insurance policy with them as the beneficiary be put on the property to cover the potential of fire and third-party liability. A few lenders will additionally require a Life & Disability Mortgage Insurance coverage to be in place.
Legal Fees – The transfer of ownership of the residential unit must be recorded at the Land Title and Survey Authority Office, which is normally done by a lawyer or notary public. In addition to the Land Title Registration costs and other disbursements, these specialists will charge fees for these services. In order to correctly register the mortgage paperwork, each new mortgage loan will also be subject to a number of fees and disbursements.
