Before you calculate the amount of your down payment and determine what you can afford, it’s a good idea to set aside a few thousand dollars to cover the extra costs that seem to spring out of nowhere. Here is an overview of costs you could encounter. The good news is that not all of them will apply.
This is the amount of time over which the entire debt will be repaid. Most mortgages are amortized over 15-, 20-, or 25-year periods. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run. For payment comparison over various amortization periods, refer to the schedule of payments.
A basic appraisal usually costs under $250.
Here the interest rate is fixed for the full term of the mortgage, and you will have to pay a penalty to change the agreement conditions. This type of mortgage is ideal for buyers who suspect that interest rates will rise and who are not planning to move in the near future. This type of mortgage is usually available in a wide variety of terms.
These monthly fees vary from complex to complex. The fees are applied to everything from grounds keeping and carpet cleaning to security personnel and health club maintenance. Depending on the type of structure, these fees will usually be a few hundred dollars.
With this mortgage, you’ll enjoy the same peace of mind as a closed mortgage, plus the flexibility to convert to a longer closed mortgage at any time without penalty. If you think rates will drop, this will allow you to wait until you feel they have hit bottom, or if rates rise, you can lock in.
If you’re moving into a condominium (complex not necessarily a high-rise) this certificate outlines the condominium corporation’s financial and legal state. It will cost you up to $50.
Home Inspection Fee
For around $300, depending on the size of your home, you’ll receive a complete written report about the condition of the structure. Do your research and hire a reputable firm.
Land Transfer Tax
This applies in most provinces and ranges from 1% to 4%. For instance, in Ontario, you’ll pay 1% of the first $55,000 – $250,000 and up to 2% of any amount over $400,000.
Lawyer (Notary) Fees
Each real estate transaction requires the assistance of a legal professional to review the Offer to Purchase, search the title, draw up the mortgage documents and take care of the details on the day of closing. Lawyers fees range widely depending on the complexity of the transaction. Ask your RE/MAX agent to recommend a lawyer. And remember, fees can be negotiated.
Mortgage Broker Fee
Some brokers may charge as much as 2% of the total mortgage to find you a lender. In most cases though, the broker is paid by the lender. Buyers with good credit should not have to pay a fee.
Mortgage Loan Insurance Premium and Application Fee
Mortgage loan insurance will be necessary if you have a high-ratio mortgage (less that 25% down payment). The application usually costs $75 with a valid appraisal, otherwise it’s $235. The actual insurance premium will range from .5% to 3.75% of the purchase price and is added onto the mortgage.
Whether you’ve decided to do it yourself or hire a moving company, now is the time to budget for the costs involved.
Your lender will insist that you have insurance on your property because your home is used as security for the mortgage.
If the Vendor has paid a portion of the taxes in advance, you will be responsible for reimbursing the Vendor on closing. Plus, if you have a high-ratio mortgage, your lender may require that you have your property taxes added to your mortgage payments.
Your taste will be different from the previous owner. Set aside money to paint and wallpaper. Prepare a list of things you can live with, for now, and decorating faux pas that need immediate alteration.
Renovation and Repairs
Your home inspection may indicate the need for some general repairs or a major project. Have some money set aside, particularly if you are purchasing an older home.
You’ll be charged for telephone, cable and a variety of other services that you hook up at your new home.
Your lender will require an up-to-date survey. You can make it a condition of the Offer to Purchase that the Vendor provide a survey, or you will have to have one done. If there is no survey available, you may purchase “Title Insurance” in lieu of a survey which saves you about $500 – 700.
Utility fees are calculated through a meter so you will be responsible for paying what you have used up on the meter.
Water Quality Certification
If you are purchasing a home with a well, you’ll want to ensure the quality of the water. This will cost approximately $50 to $100.