For those who are buying a house for the first time, they may not be aware of the costs that they may be faced with. This can come as a shock for those who are assuming they will only need to have enough funds for their downpayment.

When Buying A Home Who Pays The Realtor?

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One of the costs that the home buyer does not have to be faced with is the realtor costs. Even if the buyer is using the services of a real estate agent. Which is to their benefit if they do. However, the buyer’s agent does not work for free. As a standard practice, the selling agent will give a percentage of their commission to the buyer’s realtor. This is something that is negotiated between them.

What Is Included In Closing Costs When Buying A House?

Some home buyers assume that they will not have any closing costs as buyers. This is not true, and it is something that should be factored in with the home buying venture. Some experts suggest that reserving 3% to 4% of the purchase price of the home for closing costs is reasonable.  The type of closing expenses for the buyer may include:

The Fees For Appraisel:

The lending institutions for the buyer may insist that an appraisal be done on the property that the buyer is considering. This is because the lender wants to know that the house has enough value to it. In oreder to cover the mortgage amount being lent as this is the security for the mortgage. The cost usually starts at around $300 and will increase depending on specific circumstances such as where the property is located.

Land Surveys:

In many cases, the buyers will have a copy of the land survey. If they don’t, then again, the lending institution may insist upon this. Although in many cases, they will accept title insurance in place of the survey. However, the homebuyer may want a survey, so they know exactly what property will be there. The cost of this can be anywhere between $1,000 to $2000.

Title Insurance:

This is critically important to have as it is protection against title defects and real estate fraud. The average cost is about $400.

Legal Costs:

Home buyers will need to rely on a lawyer to take care of the closing of the sale. They will determine what additional costs will be incurred as they have several processes that they need to go through. For example:

  • There will be costs involved in the title search that is needed.
  • The title deed has to be drafted and transferred.
  • The mortgage papers have to be prepared.
  • Then there is the land transfer tax that includes additional fees.
  • Other costs can include reimbursement to the buyer for prepaid taxes and prepaid fuel.
  • Finally, there are the lawyer’s fees for the services being provided.

It is difficult to estimate the costs of all of these because each home buying venture is unique. A more by can ask the lawyer to provide a rough estimate.

Fire Insurance:

Fire insurance will be mandatory as required by the mortgage lender. This needs to be in place upon the closing date. The costs will vary depending on a lot of specific circumstances. The home buyer may be able to negotiate a payment plan with the Insurance company, so the entire cost of it does not have to be paid on closing day.

Mortgage Default Insurance:

This is another cost if the home buyer doesn’t have 20% or more to put down as a down payment. In most cases, this cost gets added to the mortgage, so it is not immediate out of pocket expenses at the time of closing.

Who Typically Pays Closing Costs On The Purchase Of A House?

There are closing costs that pertain to both the buyer and the seller. When it comes to the real estate agent costs, it is the seller who is responsible for this. They will agree to a set percentage with the real estate agent. The buyer will most often be represented by a realtor as well. They have to be paid for their services. The standard practice is the selling agent will agree to pay the buyer’s agent a portion of their percentage they agreed upon with their client.

What Fees Do You Have To Pay When Buying A House?

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The major fees that have to be paid when buying a house are as listed above. There are small additional costs that get added in that can mount up. For example, in the legal fees, there are usually disbursement costs that can include the costs of postage, courier services, photocopying. These are separate from the lawyers fees, which are based strictly on time spent on the closing file by the lawyer and the related staff.

Fees can also vary depending on the purchase. For example, the fees differ between a resale home and a new home. This can mean the inclusion of additional fees for interim occupancy closing.

Other costs that can vary can revolve around the mortgage documents.

Can You Add Closing Costs To A Mortgage Loan?

Some buyers become overwhelmed with the closing costs and may not have set enough funds aside for this. They then may try to determine if they can add these costs to the mortgage.

It may be possible to do this, but there may be some risks involved. Lenders will only lend enough money for home buying that they feel can be carried comfortably. They want to be sure that the borrower is going to be able to honour their payments.

If adding the closing costs to the mortgage jeopardises this then the mortgage may be refused.  This is something that should be discussed with the lender before applying for it. If it is going to put the mortgage at risk, other options should be sought out such as:

  • Asking the seller if they will absorb the closing costs. If the seller is relying on the deal going through they may agree to this or a portion of it.
  • The real estate agent may have some options available to help with the closing costs.
  • Perhaps family or friends can assist with this.

Closing costs are something that every home buyer has to be aware of. Putting money aside to cover these will create less concerns when it comes to closing day.

Resources:

https://www.bmo.com/main/personal/mortgages/closing-costs/
https://www.themillsteam.ca/buying/costs-associated-with-buying-your-own-home/
https://www.jacquesrobert.com/our-fees/
https://www.northwoodmortgage.com/mortgage/can-you-roll-closing-costs-into-a-mortgage/