Closing Costs! A 101 for Home Buyers
Closing cost payments are one of the last processes that occur during the home buying process. For a potential home buyer, it is very important to understand what these pesky fees are and how much they cost. Home buyers who go into the home buying process with knowledge of the process are often more prepared to buy a home.
CLOSING COSTS? WHAT'S THAT?
In simple terms, closing costs are the administrative fees associated with certain steps of the home buying process. Closing costs can vary depending on whether the house is new or not, how much it costs, location of the house, and other factors. Most home buyers pay anywhere between 1.5-4% of the purchase price of the home in closing costs. Budgeting for these costs can help home buyers who are just starting the process of purchasing a home!
Closing fees are paid on the last day of the home buying process. On said day, all financial transactions are handled by the lawyer. After such transactions are settled, the lawyer transfers the keys to the buyer where the home is considered officially purchased!
FEES INCLUDED IN THE CLOSING COSTS:
Fees that get paid as part of the closing costs vary from one home sale to the next. Some of the expenses that buyers often pay as part of the closing costs are as follows:
1. LAND TRANSFER TAX
Land transfer tax is a percentage of the home's purchase price. In some areas, this fee is administered by both the city and province. The best way to find out about a property's land transfer tax is to speak to a lawyer.
2. REAL ESTATE LAWYER
Most home buyers choose to hire a real estate lawyer to help them with the purchase process. Lawyers help home buyers by looking over the documentation and checking the title. The lawyer is usually the one who gives the keys to the buyers at the end of the transaction.
3. NEW HOME WARRANTY FEE
A new home warranty is only applicable for home buyers who are purchasing newly constructed homes. The home warranty is usually offered as a part of the cost of the new home. The new home warranty protects buyers against major structural defects, problems with appliances and any other problems with the building that might be discovered within a stated period of time.
The new home warranty fee functions like a home oweners insurance policy. However, it is not the same. Home buyers who choose to go with insurance may still need to get a home warranty if they are planning to build a new home.
4. PROVINCIAL SALES TAX ON CMHC INSURANCE
CMHC insurance is the mortgage insurance that is required on home purchases where less than 20% is put down to purchase the home. Typically, a homeowner will pay for their mortgage insurance as a part of their normal monthly mortgage payments. However, some areas require the sales tax on the mortgage insurance to be paid with the rest of the closing costs.
Have Questions regarding Real Estate? The Iris and Evelyn team are here to help! With their countless years of buying and selling Real Estate Properties, their experience and knowledge can help you make the right choice!
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