The cost of borrowing money to purchase a home is at the lowest irs been in decades, and that's a huge bonus if you are in the market for a home. However, your mortgage is not the only cost you will incur when you purchase a home; you will also be responsible for what are collectively known as "closing costs". These are charges for the various services used in the process of purchasing your home.
These charges can add up quickly, and there are some that you simply cannot avoid or lessen; they are legally required and some are fixed at a particular rate or charge.
Here are some of your major closing costs:
Legal fees. Since a lawyer is an essential part of your home-buying team the work provided involves fees. Most legal fees include searching the title of the property, arranging a property survey if necessary and handling other disbursements as required.
Mortgage Insurance and application fee. For any high ratio mortgage (any mortgage in which 75 percent or more of the house's purchase price is covered by the mortgage) the lender requires mortgage insurance.
Mortgage broker's fee. A mortgage broker will charge a fee to set up a mortgage for you. In some cases the fee may be included with the legal fees if your lawyer arranges the mortgage, or included in the lender's fees if you deal directly with a lender such as a bank.
Property insurance. This insurance covers the replacement value of your home and its contents. Most mortgage lenders will require proof that you have this insurance before processing a mortgage.
Land Transfer Tax. Everyone buying property in Manitoba must pay a land transfer tax.
GST GST is payable to some degree on the purchase price on all new homes, although partial rebates are available on the purchase of most homes. A resale residential home is usually exempt from GST. Various other closing fees, however, do involve the payment of GST.
Job Loss Mortgage Insurance. This job loss insurance plan will take care of your mortgage payments for up to 12 months if you should lose your job involuntarily. Your REALTOR has all the details.
Property Tax Adjustment. This may be the largest expense you will have when buying a home. Essentially, it is a repayment from the buyer of the property to the seller for the amount of property tax prepaid by the seller.
Home Inspection. A professional home inspector knows what to look for and can confirm or add to the information you have gleaned from the REALTOR and your own inspection.
Extra charges. There may be additional costs for things like heating oil left in the tank which the seller already paid for, or other costs incurred by the seller for things that are included in the sale.
Hook-ups. You may run into hook-up charges for appliances and services such as telephone, cable, hydro and other utilities.
Moving costs. There are some basic costs involved in from your old place into your new home, particularly if you hare using the services of a moving company.
A REALTOR can give you more information about closing costs and how much to allow in your budget.
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