What Are Closing Costs?

You've found your dream home, the seller has accepted your offer, your mortgage 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.

The closing is the process of passing ownership of 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.

As a responsible buyer, you should be familiar with these costs that are both mortgage-related and government imposed. Although many of the fees may vary by locality, here are some common fees:

Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.  Depending on the property, an appraisal may or may not have occured.  Also, sometimes the lender covers the appraisal fee, so be sure to ask you lender about that.

Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.

Mortgage Default Insurance: If you buy a home with a less than 20% down payment, it will be required that you pay a fee for mortgage insurance, which gets built into you mortgage. This fee protects the lender against loss due to foreclosure.  This will be provided through CMHC, Canada Guaranteer, or Genworth.  Ask you lender about what the premium will be that will be applied to your mortgage for this.

Land Title Registration:   This expense is charged in BC for recording the purchase documents and transferring ownership of the property.  For most properties it is approximately $75.00

Property Transfer Tax:   First time buyers will avoid this if purchasing a home under $500,000.  But all other home buyers will incur a fee of 1% on the 1st $200,000, and 2% above that up to $2,000,000 and 3% above $2,000,000