10 Costs to Know Before Buying a Home

Closing cost are expenses you incur on top of your mortgage and are typically due upon your closing or possession date.

1. Down Payment

A down payment is the part of the home price that does not come from the mortgage loan. The down payment comes from your own money. You can buy your home with a minimum down payment of 5%, if you have mortgage loan insurance from CMHC. You need a down payment of at least 20% for a conventional mortgage.

2. Deposit

The deposit is paid when you make an Offer to Purchase to show that you are a serious buyer. The deposit will form part of your down payment with the remainder owing at time of closing. If for some reason you back out of the deal without having covered yourself with purchase conditions, such as financing, home inspection, etc., your deposit may not be refundable and you may be sued for damages. The size of the deposit varies. 

3. Home Loan Insurance

To purchase a home you must have a minimum 5% down payment. If your down payment is under 20% it is considered a high ratio mortgage and you must account fo home loan insurance, provided by the Canadian Mortgage and Housing Company (CMHC) or Genworth Financial.

Insurance fees typically range from 1-3% of the mortgage principan and depend on the borrowing amount and percentage of down payment. Insurance fees can be added to the principal of your mortgage and paid monthly or paid upon closing.

4. Legal Fees

Closing your property will require the use of a lawyer. 

5. Appraisal Fee

Your mortgage lender may ask you to pay for a recognized appraisal in order to complete a mortgage loan. An appraisal is an estimate of the value of the home. 

6. Home Inspection Fee

A home inspection a condition is typically a condition on your Offer to Purchase. A home inspection is done by a qualified home inspector to provide you with information on the condition of the home

7. Title Insurance

Your lender or lawyer may suggest that you get title insurance. This will cover loss caused by defects of title to the property.

8. Prepaid Property Taxes

Property taxes are charged by the municipality where the home is located. They are based on the value of the home. The seller may have already paid property tax or other expenses that apply to the time after the house passes into your hands, do you will need to pay the seller back.

9. Property Insurance

The mortgage lender requires you to have property insurance because your home is security for the mortgage. Property insurance covers the cost of replacing your home and its contents in case of loss. Property insurance must be in place on closing day.

10. Other Costs

Depending on your situation, you may have some other initial expenses to consider are moving expenses, renovations or repairs, condominium fees, utility fees (telephone, gas, electricity, cable TV, satellite TV, Internet etc.) and renovations (paint, new carpet, refinish floors etc.)

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