Closing Costs - What You Need to Know

Closing Costs – What You Need To Know

May 14, 2010 | News | admin | 0 Comment

Mortgage Closing Costs Explained

More often than not first time homebuyers neglect to set aside enough money for their closing costs. They assume they can use all of the money they have saved for their mortgage down payment and are usually not aware there will be closing costs that will need to be covered on closing day.

Closing Cost Advice

The rule of thumb is to set aside 1.5% of the purchase price of your home or condo for closing costs. In fact most lenders will require you to prove that you have this amount in liquid assets ready to go on closing day. Most first time homebuyers in Ontario will get a portion if not all of their land transfer tax back, but the lender still requires you to have this cushion in case any unforeseen expenses arise. You will have to provide three month’s worth of bank or investment statements showing you have these funds available….cash from a shoebox will not be considered acceptable.

What is included in closing costs?

Closing costs are made up of several items and depending on the type of property you are purchasing (condo, house) and whether or not you are a first time homebuyer, will dictate what your closing costs will include. Here is a list of the most common items:

Legal Fees
Title Insurance
Land Transfer Tax
Adjustments to purchase price
Accrued property tax or utilities owing to the seller
Any unit upgrades not included in the original purchase agreement – New home purchases
Possibly GST – New home purchase

This is not an exhaustive list and every case is unique, but if you stick with the 1.5% rule you should be ok.

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