Have You Factored in All the Costs Involved in Purchasing Your Dream Home?

After months of searching for the perfect match, you've found it. The house you'll turn into your home. The one you want to grow old in, watch your kids grow up in, and spend a lifetime building memories with your family. 

This is great but there are more mundane aspects. You have to deal with heaps of paperwork and face all of the extra costs the real estate agent talked about at the beginning of the process. 

Mortgage closing costs are similar to the stories people don't talk about when expecting your first kid. The 100's diapers in the first six weeks of their life, the constant smell of baby puke on your shoulder, not knowing if the stain on your t-shirt is porridge or actual baby poo. In both cases, it's messy. 

What are mortgage closing costs? 

When a real estate deal closes, there are factors such as administrative and legal fees to consider. These fees are referred to as 'closing costs.'

Costs to consider when the deal closes are:

• Attorney's fees and disbursements

• Insurance fees

• Land transfer tax 

Depending on the type of property being purchased, other possible costs may include:

• Commission due to your mortgage broker

• Inspections on water or septic tanks or both

Ontario has three closing costs that cannot be avoided. Once your mortgage-backed real estate deal has been cemented, these closing costs can be calculated. 

They are:

1. Land transfer tax

2. Title insurance 

3. Legal Fees

The other possible costs to expect include but are not limited to:

• Whether a home inspection is required? (structural, pest, etc.)

• The loan origination fee.

• The insurance you choose as a homeowner.

• Any other taxes and insurance fees, if applicable.

How to quickly determine your closing costs.  

By simply adding your insurance, taxes, and legal fees, you can calculate your purchase's closing costs. Closing costs can fluctuate based on a few things:

1. The property itself 

2. The financial and legal companies administering the process

3. The current insurance and tax rates

One of the easiest and probably most reliable ways to determine your closing costs and be as prepared as possible is to use a calculator. 

Other factors that influence the closing costs include:

1. The price of the property

2. If the property is being mortgaged

3. Location, location, location

4. If you are a first-time home-buyer

Online closing costs calculators will provide you with an estimated amount based on the figures you input. To use the calculator, you will need to know the value of the home you wish to purchase. 

Although calculating your mortgage closing costs has been made easy with an online calculator, it's essential to keep in mind that you need an outline of the costs and not just an estimated total.

Finding the most accurate and thorough mortgage closing costs calculator. 

Try to find a calculator that will provide the following detail in the results.  

• A breakdown of the fees to gain a better understanding of the different costs involved in making up the total amount.

• The ability to adjust the estimated costs so that you can enter your amounts if you have already settled on one. This will ensure that the calculated cost is more accurate and closely matched to what the actual cost will end up being. 

• Remember that some costs cannot be avoided, but others are conditional. These costs are based on the mortgage and property company that you use. Some dependent fees apply only to certain types of properties. If you are uncertain about them, it would be a good idea to factor in calculating the closing cost. This way, you can be pleasantly surprised if they don't apply or fully prepared if they do.

Be prepared to close the deal

Buying your first home is as daunting as it is exhilarating. It's possible to save a penny or two while completing the process, so don't be shy to negotiate.  Your mortgage broker may be open to negotiating their commission rates and ask the legal and administrative companies overseeing the process if they would be too. Please familiarize yourself with tax and insurance rates so that you know a good deal when it comes knocking. 

Now that you know that the price tag on the house is not the only one you should be looking out for, you can start doing your sums and make an informed and realistic decision about what you can afford to spend on your home.