Additional Costs to Keep in Mind When Buying a Property
“Umm, did you say “unexpected closing costs”? There are costs other than paying a huge sum of money to the sellers?”
Yes, there are several other items that need to be considered when buying a property. But don’t worry! If you inform yourself, you will be prepared and can avoid any financial surprises down the road!
Read on to get the gist on the expected extra costs:
1 | Notary Fees
During a property transaction, it is customary for the buyer to choose the notary and pay the notary fees. A common cost for a simple transaction is around $1,000. Should the transaction need other special paperwork, the notary will charge additional fees for each additional item. Although it can become pricey, I do believe it is better to pay a skilled professional for good work than to run the risk of poor quality work for discounted fees.
2 | Inspection Fees
The inspection is also the responsibility of the buyer and for good reason. The various parties in the transaction have differing goals. The buyer wants to know about any issues that would cause him not to buy while the seller is praying there are no negative surprises in the inspection. Inspections can costs vary between $400 to $900 depending on the type of structure inspected.
3 | Mortgage Insurance
This is an insurance that protects the bank in the event that you fail to pay your mortgage. The insurance company will cover the value of your property should the bank begin foreclosure steps. Mortgage insurance fees are added to your mortgage when your down payment percentage is below 20% of the purchase price. Check out how much mortgage insurance would cost in the example below for a $300,000 property:
4 | Taxes
New properties bought directly from the builder will have sales taxes added to the purchase price. However anytime this property is sold in the future, no sales taxes will be applied.
School and municipal taxes are calculated using the city’s evaluation of the value of the property. Depending on the time of year the transaction is processed, adjustments between the buyer and seller are taken care of at the notary. For example, annual School Taxes are paid in July. Should the deed of sale be signed on September 1st, the buyer will be responsible to reimburse the seller for the previously paid taxes from September to June.
Finally, a land transfer tax or Welcome tax is received by the new owners some time after they have taken possession of the property. This tax is calculated as a percentage of the sale price ranging from 0.5% to 2.5%.
5 | Title Insurance
Title insurance protect the buyer against problems related to the legal paperwork associated to the property. For example, if the certificate of location shows that the storage building is too close to the property limits, Title Insurance will cover the costs in moving the storage building should you receive a request from the municipality to do so. For an average single-family home, the cost of Title Insurance is a one time payment of around $300.
Were you aware of these additional costs when you decided to embark in the process of buying a property? Well now you can enter a transaction with confidence because you are aware of the additional costs.
For more detailed information on this topic please do not hesitate to write me your questions.