Closing Costs 101:
Closing costs are fees associated with your home purchase that are paid at the closing of a real estate transaction. Closing is the point in time when the title of the property is transferred from the seller to the buyer. Closing costs are incurred by either the buyer or seller.
Buying a home is the largest investment most of us ever become involved in. Here are some of the fees you can expect at closing.
- Application Fee: My Mortgage Auction does not charge an application fee
- Appraisal Fee: This is paid by the buyer or owner to the appraisal company to confirm the fair market value of the home.
- Legal Fees: This is paid to the lawyer or notary directly for processing the mortgage transaction. Title insurance is usually covered in this fee.
- Credit Report: My Mortgage Auction does not charge our clients for a credit report.
- Home Inspection: You will likely get your own home inspection to verify the condition of a property and to check for home repairs that may be needed before closing.
- Homeowners’ Insurance: This covers possible damages to your home. Your first year’s insurance is often paid at closing.
- Property Tax Adjustment: This is a calculation. (# of Days in year to Closing Date)/365 x Annual Property Tax Levy Amount=Adjustment Amount. To simplify, if the sale closes before June 30th, the buyer will receive a credit for the amount of the year’s taxes owing to cover the portion of taxes not yet payable by the seller. If the sale closes after June 30th, the seller will receive a credit for the portion of the year’s taxes which are owed by the buyer since the seller has already paid for the entire year’s property tax.
- Property Transfer Taxes: This is paid on purchase transactions or change of owners on title of a property. Generally the charge is 1% on the first $200,000 and 2% on the remainder. Some exemptions do apply depending on your province. Example: BC First Time Homebuyer Exemption
- Transfer Taxes: This is the tax paid when the title passes from seller to buyer.
How Much can you expect a Closing Cost to be?:
On a typical home purchase, home buyers will pay between about 2 to 5 percent of the purchase price of their home in a closing costs. For example, if your home cost $450,000, you might pay between $9,000 and $22,500 in closing costs.
Your closing costs amount will be communicated through your lawyer or notary before your signing appointment.