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Closing Costs When Purchasing an Owen Sound Home

When buying a home in Owen Sound, there are several closing costs and other expenses that you will need to pay before your house deal closes.  In this article, we will highlight for you what costs you can expect to pay before taking possession of your house.  You don’t want any surprises!

Even before your mortgage is final, there are two costs that you will pay.  First, the house inspection fee.  This fee is around $500 and is always a recommendation, as it could uncover expensive problems.  Additionally, lenders may want to see proof of a clean home inspection before providing a loan.  Second, you will be paying a deposit of around 5% of the purchase price.  You need this to make an offer, so make sure you have your finances in order before that stage.

Altogether, closing costs are approximately 1.5 to 4.1% of the selling price.  These costs cover legal and administrative services.  You will have to pay land transfer tax, legal fees and disbursements, title insurance, and PST on CMHC insurance (mortgage default insurance).  Here is a brief explanation of each item:

Land Transfer Tax: In Ontario, you are required to pay a percentage of the purchase price of your home as the land transfer tax.  Other provinces have this tax, but it varies from place to place.  Some municipalities and regions also have a local transfer tax; Toronto is an example of a city with a separate land transfer tax in addition to the provincial.

Legal Fees and Disbursements: These are expenses that you will incur from the legal work provided by your lawyer.  Your attorney will prepare the necessary documents associated with buying a home.

Title Insurance: This can be purchased through your lawyer for $100-$300, and will probably be required by your lender to protect against any losses that may occur in a property ownership dispute.

PST on CMHC Insurance:  CMHC insurance is combined to your mortgage, but the PST on the insurance will be due at the time of closing.

The only cost that is covered by your mortgage is the CMHC insurance.  CMHC insurance is default mortgage insurance.  The insurance is mandatory when the down payment is between 5% and 19.99%.  Its purpose is to protect lenders in the case that a borrower stops making payments and defaults on their mortgage.  CMHC is not necessarily a closing cost, as it is a part of your mortgage and therefore amortized over the life of your mortgage, but it is important that buyers to be educated and know where their money is going.

A couple of other expenses you may incur depending on the location of your Owen Sound house, and the type of property you purchase are septic tank test, water tests, estoppel certificate fee.  The first two are only necessary if you have a septic tank or well, and the last is an amount that you pay on condos, usually around $100.

To determine the value of your new home in Owen Sound, an appraisal will take place.  Often, the cost of an appraisal is covered by the lender, so they are aware of the home’s resale value in the case that the buyer defaults on their mortgage.  These assessments range from $250 to $350.

There are a couple of other possible costs to keep in mind such as property insurance, prepaid utility bills, and property taxes.  Property insurance protects your house and belongings and gets paid on the day your house closes.  Prepaid utility bills and property taxes may need to be paid back to the previous owner if they have paid for utilities or property taxes for the year ahead of time.  Be aware that you will be paying property tax, variable based on your location, once you take ownership of the house.

Finally, the closing day!  You should have most of the financial technicalities arranged by this time.  Transferring down payment funds can sometimes be a tedious task if it requires moving money from, for example, your RRSP.  Ensure you have done all the grunt work before closing day, so that everything goes smoothly.  On closing day, your lender will give mortgage funds to your lawyer, your lawyer will receive the down payment, and your lawyer will finish the necessary documents.  At last, you will receive the keys to the house, and be ready to start living in your new home!

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