PURCHASING
Purchasing Property & Closing Costs
Purchasing property can be both exciting and daunting at the same time. The thrill of purchasing your new home or adding to your already existing real estate portfolio can be exhilarating. My commitment to you is to walk you through the process and ensure that you have all the information required to make reasoned and educated decisions along the way. This advice and counsel comes at no cost to you.
I can help you make financial decisions that will allow you to get into position to make your purchase. I will be sure to provide you with options to help you decide upon the right mortgage product for your situation. I will also ensure that you are informed about some of the lesser known costs that could be potential obstacles for you so that they do not become unwelcome surprises. To follow are some cost considerations to keep in mind as you are walking through the decision making process.
DOWN PAYMENT:
This is probably the most obvious of your costs involved in realizing your dream of home ownership. With as little as 5% of the purchase price, you can potentially own your home. A conventional mortgage means that you can avoid mortgage loan insurance premiums. It requires you to have at least 20% down payment. Please continue for further understanding on this and other costs that will affect your buying potential.
Mortgage Loan Insurance Premium:
Mortgage loan insurance will be required by your lender if you do not have a down payment that is at least 20% of the purchase price. Most likely this insurance premium will be added to your regular mortgage payment.
Conventional Mortgage:
A conventional mortgage means that you have a minimum of 20% of the purchase price for a down payment. You will not be required mortgage loan insurance.
Down Payment Origins:
Cash in Bank – a 3 month bank history will be required to substantiate proof of funds (savings, RRSP’s, etc)
Borrowed Funds – a bank statement to verify the funds as well as proof of origin.
Gifted Funds – a bank statement to verify the funds, proof of origin and a statement from the friend/family member to prove the funds were gifted and repayment is not expected.
Sale of existing property – Proof of sales agreement, bank statement to prove the deposit of funds/equity from sale.
OTHER EXPENSES:
Closing Costs for a Purchase Transaction– you are required to demonstrate that you have 1.5% of the purchase price of the new home to cover legal fees associated with purchasing a home (lawyer fee, legal costs such as title searches/registration, Land Transfer Tax, etc.)
Legal Costs for a Refinance Transaction – you will have a legal fee to register the new mortgage.
Appraisal Fees – your lender may require an appraisal be completed on the property. Often this expense is the responsibility of the borrower (you). An appraisal is not something that you should order on your own as some lenders will only use the services of pre-approved certified appraisers. Generally this cost can be approximately $400. However there is a large variance in cost depending on the size and complexity of the property.
Estoppel Fees – This certificate can be required when purchasing a condominium or strata unit. Generally in the range of $100.
Home Inspection – This is a report ordered by you, regarding the condition of the home that you are purchasing. This inspection is completed by a professional that is an expert in seeking out any potential dangers or weaknesses of the property. The report is not required however it can grant you peace of mind so that you have some assurance that there will not be any unwelcome surprises after you have taken possession of the property. The report is generally around $500 but again, can vary depending on the size and complexity of the property as well as any suspected lurking dangers such as urea formaldehyde.
Property Insurance – Your lender will require that you carry property insurance as the home is their security upon the loan. The property insurance must be in place for the closing date.
Title Insurance – This is a report ordered by you through your lawyer. This is not required a required certificate. This certificate will protect you surrounding the specifics of the property such as property lines, zoning, prior holds against the property etc.
Private Lending Fees – Sometimes your mortgage may need to be arranged through a private or alternative lender if you have a particularly strained situation. If this should happen, the lender may require a fee to be either paid up front or as an additional premium on your mortgage borrowing rate.
Water quality certificate – This pertains to properties with well water service. You will want verification of clean water and an operational system. Sometimes this cost is negotiable and can be a included as a condition on your Offer to Purchase.