What Are Closing Costs?
You've found your dream home, the seller has accepted your offer, your loan has been approved and you're eager to move into your new home. But before you get the key, there's one more step--the closing.
Also called the settlement, the closing is the process of passing ownership of a property from seller to buyer. And it can be bewildering. As a buyer, you will sign what seems like endless piles of documents and will have to present a sizeable check for the down payment and various closing costs. It's the fees associated with the closing that many times remains a mystery to many buyers who may simply hand over thousands of dollars without really knowing what they are paying for.
Simply put, closing costs are all the fees charged by title companies, banks, lenders, and others who help you through the process of buying your home. These closing cost fees are added to your home purchase price.
However, here are a few of the most common fees that are included in the closing costs of buying your home:
- Lawyer's fees – These fees vary across Canada, and the Hamre Team can refer you to a lawyer who offers a competitive legal package.
- Title insurance – These may be purchased in lieu of a land survey in some cases. They provide protection against several defects such as problems with the property that would have been revealed by an up-to-date land survey.
- Land transfer tax – Buyers must pay this tax to their provincial government when the property's title passes from the seller.
- High ratio mortgage insurance – This insurance is needed if you are buying a home for less than 20% down.
Realtor fees are most often paid by the seller, so those fees are not included in closing costs.
Make sure you consult a real estate professional in your area to find out which fees--and how much--you will be expected to pay during the closing of you prospective home. Keep in mind that you can negotiate these costs with the seller during the offering stage. In some instances, the seller might even agree to pay all of the settlement costs.