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Toronto, ON (PRWEB) August 05, 2013
When a homeowner is trying to close their home, the largest portion of the money needed is saving for the down payment. Most down payments are from five to 20 percent. However, closing costs can quickly add up if a potential homeowner is unaware, says KANETIX.
Before purchasing a home, a potential homeowner will need money for the down payment as well as other costs associated with closing a home. These relate to everything from real estate or land transfer taxes and property insurance to appraisal fees, lender’s fees and more.
If someone plans to use a down payment that is less than 20 per cent of the sales price and the sales price is under $ 1 million, they will be using what is known as a high ratio mortgage. With this type of mortgage, it is a requirement that the loan is insured by one of two entities. These entities include Genworth Financial Canada or Canada Mortgage and Housing Corporation. The cost of mortgage default insurance will vary based on the amount of down payment that one is placing on the transaction as well as the loan payment.
In addition to mortgage insurance, some Canadian provinces will also charge a special tax when ownership of real estate is transferred. The amount of this fee can vary from province to province as well as based on the sales price. In addition, some municipalities also have a land transfer tax. It is important to take a closer look at the cost of this tax in ones local area before they select the real estate they want to purchase. In some cases, decreasing the sales price just slightly so that it is below a certain threshold for the land transfer tax can result in considerable savings.
There are also legal fees and notary fees that will be assessed during a closing. Even if one chooses not to work with a lawyer or notary during the loan process, the lender will use these services on one’s behalf as well as for disbursement of funds. These costs associated with the purchase of real estate will then be conveyed. Ones mortgage professional or real estate agent can help them to estimate how much these fees may be.
Mortgage lenders generally will require property owners to purchase and to maintain a real estate insurance policy. This policy will list the mortgage company as a beneficiary, and this ensures that if the property is destroyed, the mortgage loan will be repaid with the insurance benefits. It is important to note that the cost of property insurance can vary considerably based on the insurance company, the type of home, the size of the home and its estimated value. Some insurance companies may require a property inspection, so it is important to consider the total cost of insurance when selecting a property insurance company.
An appraisal is a standard part of the mortgage process. Some appraisers will demand up-front payment for their services, so this may be an out of pocket cost. Others will allow one to pay for their services at closing. The cost of this fee will also vary, but in many cases, it is under $ 500. While an appraisal is typically a requirement, a property inspection is generally an optional (but recommended) charge. This is a report that will provide the buyer with more information about the condition of the property, and the cost may be several hundred dollars or more.
Interest on a new loan will begin accruing on the closing date. However, this may not make ones first scheduled payment for several weeks. Therefore, one will see interest charges on the closing statement. This is a financial adjustment that can vary significantly based on the lender’s policy regarding when the first scheduled payment will be made, what date the loan closes and the average daily interest charges.
When one purchases real estate, the title of the property will be transferred into their name. When issues related to title defects, fraud and more arise, this could be at risk to lose title to the property. Title insurance protects one from financial loss in relation to these events. The cost of title insurance can vary, but it generally is only a few hundred dollars.
All real estate transactions have closing costs associated with them, but the fees can vary considerably. So, it is important to estimate the fees carefully and plan for them near closing.
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