So you’ve found the perfect home, in the perfect location, and you’ve worked out a great price. It’s time to close the sale – and closing a home sale usually goes quite smoothly, right? If you know your closing costs ahead of time, yes it does. But if you start closing on a home without knowing what you’ll need to pay, you may find that taking possession of your new home isn’t as easy as you’d have thought. So how much money do you need to budget for closing costs? Here’s what you need to know.
How Do Closing Costs Work?
When you sign the paperwork on your home purchase and mortgage agreement, you’ll be expected to pay your mortgage lender and some third parties a certain amount of money upfront. These closing costs are meant to cover certain expenses that lenders and other parties pay when you buy a home. In general, you can expect to pay anywhere from 2 to 5 percent of the purchase price of your new home in closing costs.
What Fees Do Closing Costs Entail?
Closing costs can include a whole variety of fees meant to cover various expenses a lender may incur. You’ll need to pay a Land Transfer Tax upon closing. In British Columbia, the Land Transfer Tax is 1 percent of the purchase price on the first $200,000, plus 2 percent of the fair market value greater than $200,000. You’ll also need to pay for title insurance, which protects your property against title defects. Title insurance typically costs about $250 to $300 plus tax for most homes.
Other closing costs include home inspection fees, which range from $200 to $500, as well as lawyer fees (about $200 to $300), loan application fees ($75 to $400) and homeowner’s insurance ($100 per month).
How to Reduce Your Closing Costs
Most closing costs are mandatory, but some are negotiable. One easy way to reduce your closing costs is to persuade the seller to pay for some or all of the closing costs. Keep in mind that the seller doesn’t have to agree, so you’ll want to add some extra incentive to give the seller a reason to say yes – for instance, by offering to pay the deposit in cash. You’ll also want to dispute any questionable fees with your lender. You shouldn’t have to pay a courier fee if you’re not sending and receiving documents via courier, for instance.
Closing costs can add a significant amount of money onto the price of your new home, but an experienced real estate agent can help you to negotiate these fees and save money. To learn more, contact Chamberlain Property Group at (778) 476-7778.