Sealing the Deal

By Marcia Luke

No one likes to make a purchase and then find out that there are hidden fees attached to the original price. This is especially true for a large purchase, like a new home. In truth, the extra costs associated with the purchase of a new home aren?t hidden and should be anticipated before you even agree to the purchase.

Closing costs are part of becoming a homeowner and, painful as it might seem, they're necessary for a number of reasons. Certain closing costs are paid to the lender or the government and others go to the seller. It's much like

walking into a corner store and buying a candy bar. The candy bar costs a certain amount to produce and package. But the candy factory has to spend money, which gets passed on to the corner store, which in turn has to pay bills, which involves charging the consumer a bit as well. Factor in the GST and PST, and the price will increase more. It's human to ignore the real cost of your chocolate bar and concentrate on what it costs you, but that's not the big picture.

The same applies to home ownership. A new home is not only about borrowing money from the bank and making mortgage payments. But it is the most obvious portion of the purchase. In order to borrow from an institution, there are certain assurances that the lender requires to make the risk of lending you money worthwhile. The lender needs to know that you are going to insure the home in the case of a disaster. They need to know that you are committed to paying your mortgage, so if your down payment is less than 25 per cent, then your loan must be insured as well. Like any other type of insurance, your home must also be appraised and inspected beforehand. All of these costs will add to the original purchase price of your home.

The government, like everything else, must charge taxes on purchases. Land Transfer Tax is the equivalent of a provincial tax on your purchase. You are also required to pay GST. The seller may have paid some utilities or property taxes a couple of months, or up to a year, ahead. Because the home is now yours, you have to reimburse the seller for these prepaid bills.

You personally, should want to hire a lawyer to read the fine print on your purchase and remember, a sales estate agent will be reimbursed fees for making the sale happen. Because they know their jobs well, the purchase of your home will move much more smoothly, making your transition as pleasant as possible. They can even help you to estimate your closing costs so that you have a solid estimate ahead of time. Will you also be hiring someone to help you move? Or renting a truck? Do you need to buy furniture for certain rooms in your new home? How much do utility companies charge for hook-up fees? These are all additional expenses, many of which are one-time only costs that will add to the price of your new home. In total, you can estimate between three and four per cent of the purchase cost of your home for closing costs.

It may seem like too much to handle when they're listed one after the other, but as long as you anticipate closing costs well in advance, you'll see that your home is just another candy bar.

In Closing:

The settlement sheet is signed by both you and the seller. This sheet is like an invoice, outlining the financial charges to both parties.

Then you're required to sign the mortgage note and Truthin-Lending statement which between them show the agreement made between you and the lender: how much the loan is for, when you will pay, how much each payment is, and where the payments are submitted. To be eligible you must have proof of insurance and inspections performed.

The exchange of money! The lender pays for your home and you pay for your closing costs.

Then you receive the keys to your new home and within a few days the transaction is recorded and the closing agent can provide each party with the funds owed.

Your property deed, much like the ownership slip for your car, is a document used for the transfer of ownership and states you as the new owner of your own home.