Three Closing Costs You Must Be Aware Of While Buying A House
If you are a first-time homebuyer we reckon you are most probably making do on a lean budget. When you are on the verge of closing your home-buying formalities you may be faced with the dilemma about how much money is required at the lawyer’s office. More often than not, the closing amount may be much higher than the sum you would be expecting. In the middle of a big purchase where every penny counts, a couple of thousand dollars may just throw many of your life-plans off the track. Here's how you can prepare yourself to face these unexpected costs. Where is it that you will find these hidden cost showing up? Well you can face these in the form of cash outlays, property tax adjustments, and Provincial Sales Tax and CMHC.
Cash outlays can be in the form of home inspection fee or even an initial deposit to show intent. You would have to get a home inspection done as a part of your home purchase offer. This would warrant a fee of about $500 and the home inspection will get you a lowdown on the condition of home. The fee may be less or more according to the circumstances under which the inspection is conducted.
Also, when you make your home purchase offer you would need to make a deposit towards your down payment. This deposit shows your intent and commitment to buy the property and also assures that you are financially capable of making the purchase.
Pre-Paid property taxes
Upon purchasing a house certain property taxes need to be paid to the municipality. If these have already been paid by the seller beyond the date of pruchase of the house, you will have to pay the same or a portion of the taxes to the seller. Your need to approach your real estate lawyer who will help you with the owed prepaid property taxes.
Provincial Sales Tax and CMHC
Incase the down payment you have made towards your house amounts to less than 20 per cent of its purchase price, you would have to pay mortgage-default insurance, also known as CMHC insurance. This has to be done in order to extend protection to the lender in the event of your inability or failure to make mortgage payments. The CMHC premium is one time and is about 4 per cent of the loan money in case the down payment you have made towards the house is lesser than 10 per cent of its cost or purchase price. It is to be noted that the Provincial Sales Tax on the insurance must be paid by you and it cannot be an addition to your mortgage. In other words, it must be paid separately. But the MDI premium is usually added to the mortgage balance and paid over the course of the mortgage term.
If you need help with any of the above and other hidden costs related to home-buying don’t hesitate to get in touch with us and have a clear understanding of the matter.