The Intricacies of Closing Costs

by AgentYouNeed on April 10, 2012

When you see your dream house is within your price range, closing costs won’t be at the front of your mind. It’s understandable; you’re too excited.

So get all the information you need on hidden charges before you begin your property search. For a start, try and save a decent deposit. Paying less than a 20% down payment on your house can mean paying an extra 1% to 4.3%.

The Department of Housing and Urban Development recommends allowing 3% to 5% of your budget for closing costs. Perhaps you’ll head for the market with slightly less than you banked on, but at least you’re prepared to deal with the extra charges, if faced with them.

Extra taxes can mean additional closing costs

Depending on your area, you may need to pay a property purchase tax to your Provincial Government.

Take British Columbia. Here you’ll pay a 1% purchase tax on the first $200,000 of your home. However, first time buyers are exempt from this tax on houses up to $425,000. The lesson is, find out the tax situation in the area you’re looking to buy.

Extra services can mean more hidden charges

For instance, mortgage lenders usually require a written analysis of a property’s value by a qualified appraiser. Mortgage appraisal fees can range from $99 to $300.

You may also need a land survey, giving a written legal description of the land that a home sits on. These can often be obtained from the previous owner or City Hall. But if not, prepare yourself for the fee of approximately $500. And don’t forget…

Peace of mind also means more closing costs

However, this really is value for money. What if you buy a house and the roof caves in? What if you’re the victim of mortgage fraud? Paying for a home is a life’s work. The little extra spent on legal representation protects you from devastating mistakes.

The same goes for title insurance (typically $150 – $500), which protects you against any hidden defects to your home. Also, a home inspection will evaluate the physical structure of the home you’re planning on buying. This costs around $300 to $500. It seems a lot of money now, but it’s not a scratch on your whole life.

Get help negotiating closing costs

Talk to a good REALTOR® who can take care of the intricacies that get in the way of a peaceful move, and help you not only prepare for those closing costs but negotiate them for you as well.

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