How to Plan and Save for Closing Costs When Buying a Home
Though most people pay attention to the effect of the mortgage rates on the monthly payments, the closing costs when moving into a new home are often ignored. From maintenance to inspection, there is a lot that a new house demands before you can start converting it into a home. Planning and saving for these essential closing costs is therefore an important phase of the home buying process.
Go through the following tips and guidelines to learn about the various closing costs associated with a home and learn how you can plan and save for them without going off budget!
Identify what you are Up Against
Though the complete list of closing costs may vary depending upon your chosen lender and type of Canada mortgage, the following closing costs are common for almost all mortgages in Canada. These include:
- Home Inspection Costs – Paid to a professional inspector to determine the condition of the property.
- Mortgage Insurance or CMHC Insurance – Paid in case the borrower is paying less than 20% down payment.
- Land Transfer Tax – Charged according to the municipal rates of the state.
- Appraisal Fee – Used to determine the resale value of your home for the lender in case you are unable to make your payments.
- Utility Bills – Any outstanding previous utility bills need to be paid before moving in.
- Property Taxes – As per the requirements of the city and state.
- Property and Title Insurance - Additional insurance for safety.
- Legal Disbursements – Paid for documentation and other legal recordings.
- Down Payment – Last but not the least, you will have to pay at least 20% of the loan amount (except in special circumstances) as a down payment to your lender. Though not literally a closing cost, the down payment must be considered in advance when you are thinking about getting a Canada mortgage.
Home Inspection – The Most Important of the Bunch
Hiring a professional home inspector and attending the inspection yourself is considered the most essential step when you are buying a home. The home inspector will look at and inspect the entire house in detail, and will let you know what the total maintenance needs of the house are.
From the roof to the floor boards, there is a lot in a home that needs to be checked and addressed promptly before you move in. You can save thousands of dollars if you get a home inspector to check out and pinpoint the major issues in the house.
A typical home inspection on an average costs around $450, though the exact figure depends upon the size, location and condition of the property.
Buying and owning a home is more than just filing for a mortgage and start making the payments. Aside from emphasizing on the main element i.e. the Canada mortgage, you also need to decide whether or not you are ready for these small yet significant home ownership costs.
A little proactive planning can go a long way and ensure a worry free stay for your family in your new house! So, start saving and planning for your Canada mortgage today!