Closing Costs – Part 2

By this time, you’ve selected a property, picked your mortgage options and are getting ready to finalize everything and make an offer. This means getting down to certain details and their associated costs. It helps to know what these are up front so you can minimize any last-minute complications. When calculating closing costs, it’s fairly safe to assume you’ll need an additional 1.5% to 4% of the purchase price to cover things such as these:

• Professional home inspection: Even though you’re buying a newly built home, that doesn’t mean you should skip the home inspection. Your builder will provide you with a walkthrough before you take occupancy, but a professional home inspector can sometimes find things that you may not even know to look for. A newly built home is usually covered by a builder warranty program. Be sure to verify whether the new home warranty enrolment fees are covered in the purchase price or whether they have to be paid separately.
• GST/HST for newly built homes: If you’re buying a newly built home, you may need to pay GST/HST on top of the purchase price. Some builders include the GST/HST in their sale price, so be sure to check. Take advantage of any government rebates, which can add up to significant savings!
• Interest adjustment: You may need to pay an interest adjustment for the period between your purchase date and your first mortgage payment.
• Lawyer or notary fees: Make sure you work with an experienced real estate lawyer/notary so that all legal aspects of your house purchase are properly completed.
• Land transfer tax: Most provinces and municipalities levy a one-time tax, which is based on a percentage of the purchase price.
• PST on mortgage loan insurance: Loan insurance is calculated as a percentage of your purchase price and is added to your mortgage balance, but you have to pay PST on the fee at closing.
• Property insurance: Your home is probably the biggest investment you will ever make in your life. Property insurance is all about protecting the things you value: your home, your personal belongings and even your financial future. When choosing an insurance company, make sure it offers a range of choices, allowing you to personalize your insurance to suit your needs.
• Moving costs: Budget for a professional mover, decorating costs and fees for setting up your cable, telephone and other utilities.
• Ongoing costs: Don’t forget to budget for the cost of maintaining a home, such as condo fees (if applicable), heating, electricity, water, repairs and taxes. Don’t forget to budget for any seasonal items that you may require including snow removal or gardening supplies. A good suggestion is to budget at least 1% of the home’s value for yearly maintenance expenses.

Stephanie Temple, Mortgage Specialist with RBC