Closing costs are the legal and administrative fees
and disbursements associated with buying your home. Understanding
each one will help you budget more accurately and lead to a more
comfortable home-buying experience.
A conventional mortgage is a loan for no
more than 80% of the appraised value or purchase price of the
property, whichever is less. The remaining amount required for a
purchase (20%) comes from your resources and is referred to as the
down payment. If you have to borrow more than 80% of the money you
need, you'll be applying for what is called a high-ratio
mortgage.
Here's how it works:
You must have at least a 5% down payment when you
buy a home. Any purchase where the down payment is between 5% and
19% is considered a high-ratio mortgage, and the mortgage must be
insured by the Canada Mortgage and Housing Corporation (CMHC) or
Genworth Financial Canada. The insurer will charge a fee for this
insurance. The amount of the fee will depend on the amount you are
borrowing and the percentage of your own down payment. Typical fees
range from 1.00% to 3.25% of the principal amount of your mortgage.
This amount can be paid up front or added to the principal portion
of your mortgage. A Mobile Mortgage Specialist can help you
determine the exact amount.
Land transfer taxes
Most provinces levy a one-time tax when you
buy a home (subject to change). The tax is based on a percentage of
the purchase price of the property, and varies from province to
province. In Ontario, for example, the rate is ½% on the
first $55,000 of the purchase price, 1% on the next $195,000, 1.5%
on the next $150,000 and 2% on the remainder.
Legal/notary fees
You should be represented by a lawyer or
notary during the purchase and mortgaging of the property, and you
are responsible for paying the lawyer's or notary's fees and
disbursements.
Fire insurance
You are required by the mortgage lender to
have fire insurance effective at the time you legally take
possession of your new home. Some insurance companies may demand
proof of a home inspection or may not insure certain types of
dwellings. Make sure that you enlist your insurance agent
early.
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