So you are ready to buy your new home. Do you know what the costs are to close the deal?
Your first step is to speak to someone who can outline the costs associated with getting a new home. Whether you are working with a realtor or not you need to sit down with a professional who will secure your financing and go through the whole process. This will include the costs and working within a budget that is comfortable for you.
If you are putting a down payment of 5% then the insurers require you prove at least 1.5% for closing costs. The amount will normally be greater than this but this is a requirement you must meet. For example if you are purchasing a home for 100k you will have to show $6500 in your account.
So what are the closing costs? They will include legal fees, disbursements, taxes, moving costs, title insurance and oil adjustment to name a few..
The province of NB has just raised the land transfer tax from .25% to .5% of the purchase price. So on the same 100k purchase you will have a cost of $500. The other big cost is property taxes. In NB our property taxes are due by the end of May and are for the full year. So lets say the yearly taxes are $2400 and you purchase the home on July 1. You are responsible to pay the seller back the taxes from July 1 to December 31 or 6 months worth. In this example this equates to $1200 and becomes part of the closing costs.
The lenders today also require a title insurance policy on all their closings. The cost for this policy ranges between the provinces.
Another cost is the home inspection which is something that you should get done to ensure no major problems with the home you are purchasing. The cost for this range from $400 to $550 approximately.
Legal fees at the time of this writing range from around $600 to $800 for the actual lawyer plus disbursements. The disbursements will range in cost depending on the province you live in. The disbursements include such things as water and sewer certificate, registration fees, certificate of registered ownership, land titles, tax certificate and searches to name a few.
You also need to think about moving costs, hook ups, possible storage and maybe some minor upgrades you would like to do. If you are looking to do major upgrades then check out my blog on purchase plus improvements for more information on this great product.
CMHC has a great guide for you to use here. Check it out and take a copy when you are looking at a new purchase.
As always it pays to check out everything. Talk to your friends, family etc on who they used for things like inspections etc. Ask your mortgage broker and real estate agent for referrals and check them all out. With the internet you can get a lot of information on the people you are dealing with. This is a big step and you should have all the facts at your fingertips.
So go out and look for your new home and know that being prepared will make the process seamless and enjoyable.
As always comments are appreciated and encouraged.
Eric Gall is the owner of Avanti Mortgages (operating as a mortgage specialist for TMG Atlantic). If you are purchasing, refinancing or renewing your mortgage contact Eric or check out his website and apply online.