I help a lot of new home buyers, as a mortgage broker in Milton, with advice on what they need to expect at closing on a mortgage. It’s more than just saving for a good down-payment or having money set aside for repairs and maintenance. There are closing costs to prepare for, as well as home inspection fees, land transfer taxes, appraisal fees, legal fees, and more. Knowing what these costs will be and preparing for them can make the whole process of buying a home less stressful.
How Much You Need to Plan For
As a mortgage broker in Milton, I usually tell homebuyers to put anywhere between 3 to 4 % of your home’s purchase price aside to help cover the closing costs. This should cover the majority of most expenses you will have.
Land Transfer Tax
If you acquire land with your home purchase, you will need to pay a land transfer tax. This is a municipal or provincial tax, which is calculated based on the home’s purchase amount and can vary from one province to the next. This tends to only apply to resale homes and newly built homes tend to be exempt from this.
The land transfer tax tends to be the biggest closing cost and a lot of lenders will want to see proof that you have 1.5% of the home purchase price set aside for this. For first-time homebuyers, the government does offer a rebate that can help with this cost.
Land Survey Fee
Many lenders will want you to have a land survey done to avoid any confusion between where your property ends and your neighbours begin. A land survey fee can be anywhere between $1,000 to $2,000.
If you are putting less than 20% down payment you are more than likely going to have to pay CMHC insurance. This protects the lender in case you default on mortgage payments. It’s not technically a closing cost and usually gets lumped into your monthly payments, however, it a cost that can be a couple of thousand.
An appraisal protects the lender by ensuring that you paid the appropriate amount for the home in line with the current market value. This fee is negotiated between the buyer and the mortgage representative. It can cost around $300 to $400 usually and in some cases, the bank will take on the fee.
Anyone who owns a home will end up paying property tax, which goes to things like paying for neighbourhood maintenance, schools, and street lights. The amount can differ between neighbourhoods, home sizes, home types, and lot sizes. Home listings will usually list the yearly property tax from the previous year to give you an idea of what you would be paying .
Once you are ready to sign-off on the Offer of Purchase, you will need a lawyer to make sure the mortgage paperwork has been correctly filled. This also protects your rights and ensures the transaction goes through. Fees for a lawyer can be anywhere between $500 to $1,000.
Inspection fees aren’t compulsory, however, its a good idea to have an inspection of the home done before you buy it. Otherwise, you could be walking into a money pit without knowing. Inspection fees can be around $500.
This is mandatory to have upon closing. It needs to at least insure your home against significant damage or fire for the value of the home. Having contents insurance is also a good idea. Property insurance prices can vary depending on what you need.
Last, but not least, you should put money aside for moving. A professional moving company can cost you anywhere up to $2,000.
If you’re planning on buying a home, it’s a good idea to sit down with one of our mortgage brokers in Milton to look at all costs to expect on closing. Give us a call today!