A lot of planning goes into buying a home, especially when it comes down to putting funds aside for things like your down payment and closing costs. Quite often, homebuyers can be caught by surprise when it comes to closing costs, so it’s important that you ask your lender or broker what costs you will pay at closing. Our Mississauga mortgage brokers team is here to explain what closing costs that you can expect to pay when buying a home.

Tip: Some good advice is to try to set aside 3% to 4% of your home’s purchase price to cover your closing costs.

 

Appraisal Fees

Before a lender will lend you money for a mortgage, they will require that you have a home appraisal. The reason for this is that it protects the lender and ensures them that the price you are paying for the home is in line with current sales figures in the housing market. Appraisal fees are negotiated between yourself and your lender and can cost between $300 and $400. There are some situations where the lender may cover this fee for you.

 

Inspection Fees

While having a home inspection isn’t always required when you buy a home, it’s not something that you should forego to save a few dollars. Having a home inspection protects you from buying a home that has issues that were either not disclosed or are hidden, for example, damage to the home’s foundation, roof repairs, mould, and plumbing issues. An inspector knows what to look for and will tell you everything that is wrong with the home, allowing you to make an informed decision about whether you want to take on a home that needs repairs or not. A home inspection can also be used to negotiate the price of the home if repairs are quite large. Having an inspection can cost around $500, but it can save you thousands.

 

Legal Fees

When buying a home, you will need the help of a lawyer to review the contract between yourself and the seller. This is to ensure that everything is done legally and in order. It protects your rights as a buyer. Legal fees can run between $1500 and $2,000.

 

Land Survey Fees

Lenders will in some instances require a land survey to be done in order to record the legal boundaries between your property and your neighbours. It also protects you if there is a legal dispute about boundaries somewhere down the road. A land survey will cost between $1,000 and $2,000.

 

Property Insurance

Whether you are getting the bare minimum or going all out, property insurance is a must when buying a home. It protects the home and contents of your home. How much you end up paying for property insurance will depend on the type that you get. For example, home and contents insurance will cost more than just contents insurance. Property insurance costs between $800 and $1,500 per year. 

 

Private Mortgage Insurance

If you are not making a down payment of 20%, you most likely will be required to pay for private mortgage insurance (PMI) by the lender. PMI is protection for the lender should a borrower default on their mortgage payments. The amount that you pay for PMI is dependant on the amount that you are putting down and your credit rating. It usually costs a few thousand dollars and it gets added to your monthly mortgage payments.

 

Land Transfer Tax

Land transfer tax tends to be one of the larger parts of the closing costs, typically around 1.5% of the overall cost. Some lenders will want to see proof that you have enough funds to cover land transfer taxes as well as the down payment. Fee amounts vary and are dependant on the price of the home and whether it is listed as municipal or provincial. In some situations, you may be exempt from this fee. For first-time home buyers in Canada, you may qualify for a government rebate.

 

Property Tax

Property taxes are a fee that every homeowner pays yearly. How much you pay depends on the area that you live in, the lot that the home is on, and the size and type of home that it is. The fees are put towards neighbourhood improvements and maintenance. The amount of property tax is generally detailed in the listing of the home and will be based on how much was paid the year before.

You can see why it’s important to begin saving ahead of time when buying a home. The more prepared you are, the easier the transition to homeowner can be for you. If you want to know more about the fees that are involved with mortgages and home buying, give our expert Mississauga mortgage brokers team a call today!