Home closing costs can add up. Here’s what you need to set aside
By Robb Engen, Toronto Star
Homebuyers are often advised to set aside one to three per cent of the purchase price of their house for closing costs. These fees are explained during the home-buying process, but it is helpful to ask questions so you fully understand how these costs can affect your budget.
Legal fees: On average you should budget $600 to $900 for legal fees and an additional $200 to $400 for disbursements, which includes registering the mortgage, completing a tax certificate, and doing a title search on the property. You may also pay fees for postage, faxing and photocopying.
Shop around: Some law offices specialize in handling mortgage disbursements and offer cheaper rates. Ask your bank or mortgage broker which law firm they recommend and then call at least three other lawyers for quotes. A few phone calls can save you hundreds of dollars.
Property tax adjustment: If you buy a home, the previous owners have paid property taxes to the city. On closing, you will be required to reimburse them for prepaid taxes.
Interest adjustment date: Depending on the date chosen by your lender as the interest adjustment (the date the mortgage starts) you may be required to pay interest from the closing date until your interest adjustment date. The maximum amount would be a month’s interest at your mortgage rate.
First published in the Toronto Star on March 5, 2012.
- Banks, credit unions and mortgage companies lend money to home buyers. This loan is called a mortgage. Your lender will ask you to fill out a loan application form that includes information about your income, employment and debts, and will use this information to determine your eligibility for a mortgage.…