subject: Closing Costs And Other Related Expenses [print this page] Many home buyers particularly first time home buyers are totally unprepared for all the extra costs associated with buying a home and home ownership. Some buyers try to have the vendor pay for the costs. This usually means giving them a higher price than they might otherwise accept and then having them contractually obligated to pay many of the closing costs.
This is a sneaky, backdoor way to try to get the closing costs included in your mortgage. You should not do this as if your lender catches tell of you using this practise they may not complete your mortgage and you will lose the chance to buy a home. Other variations of this are used to include renovation costs. The buyer pays more and the vendor returns some of the money. In some places this isnt even legal and is not a practise that the prudent buyer engages in.
If you dont have additional funds to your down payment to include the following expenses it might be better to wait and purchase a home later as you may not have sufficient funds for many of the other expenses that are part of home ownership.
There will be legal fees. Once your offer has been accepted the process of conveyancing begins. This is carried out by a lawyer and can easily cost between $500-1500. In addition to the legal fees there will be a Lands Title Transfer tax and in the case of PEI real estate there may be an IRAC fee of $500 or 1% of the property value.
If you are borrowing through a mortgage broker there may be a fee for that service as well. A few thousand dollars is not uncommon to secure you a mortgage. Sometimes this fee is waived and sometimes a mortgage broker can secure you a deal on your mortgage that will offset this extra cost.
Before closing you will want to have a home inspection carried out and there will be a cost of $300-500. Water tests may cost in some jurisdictions as well but are often borne by the vendor as they are in PEI.
Before your lawyer conveys the property over to you, you will be responsible for a variety of costs related to the home you are purchasing that have been pre-paid by the vendor. Pre-paid property taxes, oil left in the tank, propane, in fact anything paid that you will accrue a benefit from the unused portion will be pro-rated and added to your bill.
Once you own the home you will have the cost of moving, any renovations and decorating that you must do right away, the cost of deposits and utilities hook-ups, change of address at the post office and a slew of other goodies that will demand your time, attention and pocket-book.
So, forewarned is forearmed. Make sure that you have a detailed list of all the costs that will be extra to your basic purchase and budget for these otherwise you will be in the middle of a legal contract without the funds to complete it and be in financial trouble before you even start. With a detailed roadmap to completion your deal, whether you are buying in my area, PEI real estate, or in another area of the country, will proceed smoothly
