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Closing Costs, Part 2: The Cost of Closing

21 October 2011

In Part I of our closing cost mini-series, Recurring and Non-Recurring Costs, we looked at the two main types of closing costs – recurring, and non-recurring. We also talked about how important it is to seriously consider closing costs when talking to your mortgage broker or when looking at homes. They’re important of course, because it can add up to a lot of money, and you need to know that before you sign any papers. But just how much money does it all add up to? That’s what we’ll look at here, in Part 2 of the mini-series. Here we’ll break down all the different costs you could face, as well as their approximate dollar amount.
Closing adjustments

  • These adjustments include recurring costs such as your property tax, any utilities, and condo fees, if required. These can be as high as $1,000 or more a month, depending on your prepaid expenses, and costs in your area. Of course, they could be slightly less than that too.

Legal fees and disbursement

  • The lawyer that handles your mortgage will search the title, take care of closing details for you, and will draw up your mortgage paperwork. And for all of this, they’ll charge a fee, usually anywhere between $1,300 – $2,500. This is usually a one-time cost.

Appraisal fees

  • These aren’t even necessary if you’re getting a second mortgage or if it’s anything other than a conventional mortgage. This fee will cover the cost of the property appraisal and can cost anywhere between $150 – $500.

Land transfer tax

  • Unfortunately, this is a cost you cannot avoid, and it’s one of the biggest costs you’ll pay at closing. This tax is usually anywhere from 0.5% to 2% of the home’s sale value and is charged when a property changes hands from one owner to another.

Interest adjustment

  • There will likely be a gap of time between your closing date and the date your first mortgage payment is due; you will need to pay any accrued interest at the time of closing. Depending on the closing date and how often you’re making scheduled mortgage payments, this could vary between $100 – $1,000.

Title insurance fee

  • Buying title insurance protects you against things that could become a real problem, such as problems with the survey, fraud, forgery, and problems with the title. All of this for as low as $165 – $225.

Home inspection fee

  • A home inspection is extremely important as it can bring things to your attention such as mold, water damage, or cracked foundations.These are problems you may not otherwise know about, and you should never finalize the purchasing of a home before having one done. These cost anywhere between $150 – $500 and are a one-time fee.

Property/fire insurance

  • Lenders won’t even give you a mortgage until you prove that you have at least property insurance. The amount of this insurance must cover the total cost of the home, and the contents within. And while that might sound like a lot of money, it’s still only about $500 – $800 a year.

Estoppel certificate

  • This closing cost is only required when purchasing a condo. This certificate outlines the financial position of the condominium corporation, as well as their current legal state. These can cost up to $100.

Don’t be scared off by the amount of closing costs there are, or even how much they can add up to be. You might not even end up paying all of them. In many Offers to Purchase and mortgage contracts, you can outline that either the lender or the seller pay some of the closing costs, off-setting yours. Find out how much you can save in the third part of this mini-series, coming Monday, Closing Costs, Part 3: Who Pays for What?

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