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Closing Costs, Part 1: Recurring and Non-Recurring Costs

17 October, 2011 / by Bryan Jaskolka

The one term you’ll hear a lot when buying a home is “closing costs.” At first, it may appear that everyone’s getting all worked about them, but you. How bad can closing costs be after all? And why are your real estate agent and your mortgage broker talking about things like having the seller pay them? Closing costs can add up to a lot of money, and this is why every expert will advise you to take them seriously when thinking about your future mortgage. In this first part of our closing cost mini-series, we’ll take a look at the two different types: recurring and non-recurring.
Recurring closing costs are costs that you’ll have to pay before you get a mortgage, and from thereon in during the time you own the home. These costs include things like mortgage insurance and property tax. While they are considered to be closing costs, you’ll also have to make monthly payments while you live in the home. The closing costs that you’ll have to be most concerned about when applying for your mortgage and signing that Offer to Purchase however, are the non-recurring closing costs – those you’ll only pay once.
There are many different kinds of closing costs, all with their own costs associated to them. The list is sometimes extensive, but the most common types of non-recurring closing costs are:

  • Legal/Notary fees and disbursement
  • Appraisal fees
  • Land transfer tax
  • Interest adjustments
  • Title insurance
  • Home inspection fee
  • Estoppal certificate
  • Credit report fee
  • Mortgage broker or lender fee, if applicable
  • Underwriting fee
  • Administration fee
  • Home warranty fee
  • Loan tie-in fee
  • Sub-escrow fee

While this list is long, there may still be other closing costs involved with the purchase of your home that you’re not aware of, and that aren’t always necessarily stated upfront by the lender, the seller, or your real estate agent. Closing costs are one area where you need to do your due diligence and really investigate what you’ll need to pay. In Part 2 of the mini-series, which will run on Friday of this week, we’ll look at just how much you should be paying for these closing costs. You might end up being surprised at just how high some of them go, to make sure that you come back Friday for Closing Costs, Part 2: The Cost of Closing.

          

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