Checklist before you go to your lawyer’s to finalize the purchase.
Down payment – CHECK
Closing Costs – CMHC and other insurers require that you have have a minimum of 1.5% of your purchase price for “Closing Costs” over and above your down payment. But beware, closing costs can easily run higher than 1.5% – and in some instances, can be up to 2 to 2.5% or higher! And for that matter, what are closing costs?
“Closing Costs” are the legal, administration and expenses you must make in order to take possession of your home. Your lawyer will usually estimate this cost for you and ask you to bring in a certified cheque at your closing appointment.
Most people can be very surprised at the cost. Generally, closing costs cover legal fees, Land Transfer Tax, Mortgage Registration Costs, Interest Owed to Vendor, and Miscellaneous Disbursements costs relating to Tax Certificate, Title Insurance, Courier and title search, filing fees, GST, etc. As well there may be additional costs including a Survey, Zoning or Engineering Report, and Property Tax Adjustments, etc.
Here’s some of the costs and what they mean:
Fire Insurance: Fire insurance be in place from the time you take possession of the home, with the lender registered as “First Loss Payable”, in case of total loss. The amount must be for a minimum of the mortgage or the replacement cost of the home. The cost can vary based on the property size and extras being insured, as well as the insurance company and municipality. The cost is generally between $400 to $800 for average Winnipeg properties.
7% Sales Tax on Mortgage Insurance: If your mortgage is CMHC of GE Capital Insured (less than 20% down payment), there is a P.S.T. charge of 7% in Manitoba, payable at closing, on the CMHC or GE Premium. While the insurance fee itself can be added to the mortgage, the sales tax must be paid upon closing.
Land Survey Fee or Title Insurance Fee: A recent survey of the property is generally required by the lender, and if one is not available, it can cost anywhere from $600 – $900 for a new survey. In lieu of the survey, most lenders today will accept Title Insurance, at a much lower rate (approximately $200 – $250).
Legal Costs and Disbursements: A lawyer will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage and conducting the various searches. Disbursements, on the other hand, are out of pocket expenses incurred by the lawyer in the closing of your purchase, such as registration fees, courier fees, title search costs, filing fees, etc. In Manitoba, most lawyers charge in the range of $400 – $650 for legal fees, plus disbursements. Check with your lawyer prior to engaging him to find out what his actual service fee will be.
Land Transfer Tax: Most provinces charge a “Land Transfer Tax”, payable by the purchaser, and the amount varies from province to province. The tax is based on the purchase price of the home.