Buying a house is expensive, duh. An expense that most people often forget about are the closing costs associated with solidifying ownership of your new home. It’s important to keep these in mind before even starting the process so you have an accurate budget going into the shopping process. There aren’t many things worse than an unexpected bill… so let’s try and avoid that. Below we explain some closing costs that often get lost in the sauce when it comes to budgeting for a home.
Mortgage Insurance
Most lenders will require you obtain mortgage default insurance if your down payment is less than 20% of the total purchase price. The cost for default insurance is usually between 3-4% of your total mortgage amount.
Title Insurance
It’s an insurance policy that will protect you from challenges relating to the ownership of your home or problems with the land title. This insurance is typically a one-time fee of approximately 250$ and, although not always mandatory, is a small price to pay for peace of mind.
Payout Penalty Fees
If you currently have a mortgage on a home that you will be selling before purchasing your new home, your mortgage pay has some penalty fees if you are within the early payout period of the mortgage. Penalty fees will vary depending on your lending institution and the terms of your mortgage contract.
Legal fees
Different solicitors will offer different things. When looking for a real estate lawyer, be sure to ask about what their fee includes. Some good things to ask about that would cost you money are Land Title Office Fees and taxes on the legal fees.
Property Transfer Tax
The most expensive closing cost associated with buying real estate. Usually equates to 2-4% of the subject property value. Your lawyer will collect the payment when the property transfer happens. It’s important to know that this amount cannot be included in your mortgage amount.
A common question we receive as mortgage brokers is “What do you charge for your services?” This is a great place to answer that because most people think this will contribute to part of their closing costs.
Until you have funded a mortgage with the use of our services, you don’t pay us anything. Believe it or not, even after you’ve secured a mortgage, you still don’t pay us anything. We receive our commissions from the lender, called a finder’s fee. So, it does not cost you anything to use our services and won’t contribute to your closing costs. In your mortgage contract, we provide you with a disclosure statement of how much we will be receiving as a finder’s fee from your transaction. We are always transparent and don’t allow these commissions to influence our services to you. Our top priority is finding the best mortgage product for you.
To sum it up, there are a few other fees that need to be paid when finishing a real estate transaction other than just your mortgage. These fees don’t take long to add up. Which is why it’s that much more important to utilize your mortgage to its full potential. Contact Venture Mortgages today to start chatting about your mortgage strategy - it’s never too early!