When buying a new home, closing costs are just another part of the process that every buyer has to deal with, so it’s important for buyers to know what to expect from them. If unprepared, it can be easy to be surprised by additional fees and costs, so all people interested in buying a home need to be familiar with how they work. Here is what all home buyers should know about closing costs including everything from why they’re necessary to what they cover, and everything in between.
What Are Closing Costs?
Closing costs are the additional fees that need to be paid at closing. How much money closing costs will cost depends on the home, but on average, the buyer can usually expect to pay roughly 1.5-4% of the home’s total selling price. So for a home that sells for $200,000, the closing costs might be from $3,000-8,000 depending on how many services are needed. Closing costs are paid in addition to the down payment, so it’s important for buyers to understand how much they’re paying before the closing date to ensure they have the proper funds available.
Who Pays For Closing Costs?
In almost every case, the Gregoire home buyer pays for closing costs. This is because the seller already has closing costs of their own such as real estate commissions. And, in general, closing costs are relevant to items that the buyer may have directed such as hiring a home inspector, doing mold testing, and so on. In some cases, the buyer may be able to negotiate with the seller to have them pay for some closing costs, but this is very uncommon, so buyers shouldn’t expect it.
Examples of Closing Costs
It’s always a good idea to know what sorts of things will count toward closing costs in order to be better prepared for them. Here are some of the different costs that home buyers may encounter when purchasing their home:
- Mortgage loan insurance: For buyers paying less than 20% down on their home, they will have to have mortgage insurance through the Canadian Mortgage and Housing Corporation. The amount paid will depend on the cost of the home.
- HST or GST: Depending on where in Canada the home is located, the buyer will have to cover either the Harmonized Sales Tax or the Goods and Services Tax, the rate of which varies depending on the province.
- Land transfer tax: The amount that this costs will vary depending on the province, but home buyers are expected to pay this tax upon closing for a home. However, first-time home buyers can be eligible for a partial or complete refund.
- Homeowners insurance: Lenders often want proof of insurance before they lend buyers any money, but sometimes it’s a legal requirement before a home can be purchased.
These are just some examples of closing costs that home buyers may encounter when buying a home. There are far more different closing costs than just these, and buyers will likely not encounter all of them. When purchasing a new home be sure to ask a skilled real estate for help outlining all of the different closing costs that require payment.
Paying for closing costs are a required part of buying a new home, so it’s important for all home buyers to know what awaits them on closing day. In order to be prepared for everything that buying a new home entails, be sure to hire a professional real estate agent who can help at every step of the process.