Home ownership carries many price tags
PURE and simple, buying a home is a daunting process. That’s why it’s necessary — almost mandatory, in fact — to do a little research prior to taking the plunge into home ownership. One of the first areas you should look at is what the closing costs will add up to on the home you purchase. Why? Well, because closing costs can be both complex and costly.
For the sake of argument, let’s say you intend to purchase a starter home for about $200,000. Not only is the purchase price a somewhat mind-blowing figure for first-time buyers, but the costs associated with making that purchase are in themselves intimidating because there are so many of them.
Let’s take a look at what the closing costs on that $200,000 abode would be:
Land transfer tax. This is payable to the government (land titles office) when the title of the home is registered. The tax is essentially a percentage of the purchase price of the home. So, if you purchase a home for $200,000, you will owe $1,650. Right off the bat, a pretty significant hit on the old wallet.
Legal fees. Figure on lawyers’ services costing at least $395.
Survey certificate. You may be able to obtain this document from the seller. If not, a new survey will cost $325 plus GST.
Title insurance. This may be an alternative to purchasing a survey certificate and zoning memorandum. Typical cost is about $200.
Registration costs. Also payable to the land titles office, the cost of registering a title is $69, cost of registering a mortgage also $69. There goes another $138.
Zoning memorandum. Provided by the city or municipal office, the cost is $35.60 plus GST.
Tax certification. It costs $35 — plus GST — to insure yourself against property tax liability.
Title searches, etc. Title searches, computer access time and obtaining microfilm copies of documents costs another $35 plus GST.
Couriers. Because large sums of money, title documents, mortgages — and keys — are not mailed, a courier must be used. Approximate cost is about $35 plus GST (again).
Miscellaneous items. Lawyers will also charge you for other costs such as postage, file materials, photocopying, tax charges and file materials. Reach into the wallet for another $40 plus GST.
There are several other costs that will be incurred: property taxes, possible interest and Canadian Mortgage and Housing Corporation fees. Consequently, you may have to pay a certain percentage of property taxes owing, or you can (for a small fee) assume tax payments on the TIPPS plan. And if you’re getting a new mortgage, processing time at land titles (which takes two to four weeks) may cost you interest that must be paid to the seller.
Finally, there’s the CMHC to consider. If you don’t have a 20 per cent down payment, you’ll have to pay a percentage on the mortgage principle sum. So, if you buy a home for $200,000 and put down five per cent ($10,000), multiply the principle of $190,000 by (in this case) 3.15 per cent. That comes to another $59.85 that you’ll have to pay every month to insure your mortgage.
If you’re buying a starter home on a thin budget it’s essential to know what costs you’re dealing with. Underestimate them, and you could be in over your head before you’ve even begun.
Janna Lunam is happy in her new condominium, but she got an unwelcome surprise when high closing costs forced her to dip
into her down payment and assume a higher mortgage.