There are several fees and costs associated with getting a mortgage. Here’s what to expect:
· Mortgage loan insurance premium
If yours is a high-ratio mortgage (less than 20% down payment), your lender will require mortgage default insurance. While you pay the premium, it actually protects the lender in the event you default on your mortgage. It does not protect the homeowner in any way. The premium may be added to your mortgage or you may be asked to pay it in full upon closing.
· Appraisal fee
Your mortgage lender may require that the property be appraised, at your expense. An appraisal is an estimate of the value of the home. The cost is usually between $250 and $350 and must be paid when you contract those services.
This is part of your down payment and must be paid when you make an Offer to Purchase. The cost varies depending on the area, but it may be up to 5% of the purchase price. If you wish to make a down payment of 5% and you give a deposit of 5%, then that is considered your down payment.
· Down payment
With mortgage insurance – from providers such as CMHC, AIG United Guarantee, Genworth Financial Canada and PMI Canada – you can own your home with little or no down payment. At least 20% of the purchase price is usually required for a conventional mortgage.
· Home inspection fee
Remember that this may be a condition of your Offer to Purchase. A home inspection is a report on the condition of the home and generally costs about $500, depending on the complexities of the inspection. For example, it may cost more to inspect a home that has large square footage, one that is expensive or one where contaminants such as pyrite, radon gas or urea-formaldehyde are suspected.
· Land registration fees
This is also sometimes called a Land Transfer Tax, Deed Registration Fee, Tariff or Property Purchases Tax. You may have to pay this provincial or municipal charge upon closing in some provinces. The cost is a percentage of the property's purchase price and may vary. Check with your lawyer/notary for the current rates.
· Prepaid property taxes and/or utility bills
You may have to reimburse the vendor for pre-paid costs such as property taxes or utilities services.
· Property insurance
Mortgage lenders require this because the home is security for the mortgage. This insurance covers the cost of replacing your home and its contents. Property insurance must be in place on closing day.
· Survey or certificate of location cost
The mortgage lender may ask for an up-to-date survey or certificate of location prior to finalizing the loan. If the seller does not have one or does not agree to get one, you will have to pay for it yourself. It can cost in the $1,000 to $2,000 range.
· Legal fees and disbursements
These must be paid upon closing and cost a minimum of $500 (plus GST/HST).Your lawyer/notary will also bill you directly to check on the legal status of your property. See “How to choose a lawyer” for questions to ask when searching out legal representation.
· Title insurance
Your lender or lawyer/notary may suggest title insurance to cover loss caused by defects of title to the property. This can include real estate title fraud, where title documents may be forged, or identity fraud, where someone has assumed a property owner’s identity to secure finance against that property. Typical costs are approximately $300 on new properties priced up to $500,000.
· Creditor life insurance
This protects homeowners in the event of critical illness, disability and death.
Choosing a lawyer
You need a lawyer (or a notary in Quebec) to protect your legal interests to ensure the property you’re thinking of buying does not have any liens, charges or clean-up orders associated with it. He or she will review all contracts before you sign them, especially the Offer (or Agreement) to Purchase. Here are some questions to ask when searching for a lawyer.
Are you a full-time lawyer licensed to practice in this province/territory?
Do you specialize in real estate law or is it one of the areas you work in most of the time?
What is your fee schedule?
What services will you provide for me?
Do you ever participate in the price negotiation process?
Can you provide me with the names and telephone numbers of three of your recent clients who purchased homes?
How do you keep current in your field?
What tasks are usually assigned to your assistants?
Is there anything I haven't asked about you or your firm that you think I should know?
*Source: Canada Mortgage & Housing Corporation
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