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Mortgage Basics |
Thursday, July 03, 2008 |
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Closing Costs
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Land Transfer Tax: |
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½ of 1% on the first
$55,000.00 of sale price plus 1% of the sale price over $55,000.00. |
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Legal fees: |
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Generally negotiated with the lawyer before
closing takes place. Budget about $800.00 plus an additional
$250.00 for disbursements and this will be plus or minus $250.00
from what you should expect to pay. |
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Property Tax Adjustment: |
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There can be two separate adjustments made
for property taxes, one with the vendor and one with the Mortgage
Company. In the vendor’s case, tax adjustments take place based
on either projected or paid vendor taxes for the year. The taxes
are converted to a per diem rate and the vendor is charged for
the number of days in the year he or she owns the real estate
and the purchaser is charged for the rest. This is usually done
as a price adjustment by the solicitor on the closing date.
If the mortgage company collects taxes with the mortgage payment
as they do in most high ratio insured mortgages, there can be
two or more ways this is handled. The lender may not make any
adjustments on the closing date but deal with the matter at
the time the first tax bill is received. If there is a shortfall
in the tax account at that time, the mortgage company may demand
payment of the shortfall at the time the taxes are paid by them
or they may stretch it out over a period of a few months to
a year until they are paid up to date. The second way to adjust
for taxes is for the mortgage company to set up a tax account
on closing and take sufficient funds from their advance to put
in the tax account for future taxes. This amount together with
the tax installment portion of the regular payment will accumulate
to the estimated amount for taxes by June or July 1 of the next
tax year. |
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Utilities: |
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If the home is heated with oil or propane,
the tanks are filled on the day of closing and the purchaser
is charged with a full tank of fuel. Gas and electricity are
metered and generally not subject to adjustments. |
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Survey: |
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Most mortgage companies require a building
location survey prior to funding of their mortgage. This is
to insure that there are no encroachments on the property and
nothing on title that would adversely affect future value of
their security. The cost for a building location survey is about
$1,000.00. The good news is that if the survey is current and
there have been no additions to the property such as but not
limited to pools, sun rooms, carports/garages, or any other
addition that has value and changes the original foot print
of the building on the lot, most mortgage companies will accept
an older survey that reflects the current structure on the lot.
Some, but not all companies will accept Title Insurance in lieu
of a survey. |
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Insurance: |
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It is the purchaser’s responsibility to insure
the property against all perils. The cost of the insurance will
be billed to the purchaser if self-arranged or the lawyer may
include it in the adjustments if arranged by him or her. |
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GST/PST: |
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There is sales tax charged on Fire Insurance,
High Ratio Mortgage Insurance, legal fees and some of the lawyer’s
disbursements. These will be adjusted on closing. |
* In addition to
the above, any prepaid contracts not included in the price may be
adjusted.
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