Closing costs can be extremely confusing when purchasing a home. We've gotten a lot of questions on them since we've started the PEI Real Estate Report, so we figured it would be a perfect time to answer them head on. Here are a list of the closing costs you can expect when entering this process:
1. Land Transfer Tax. When you purchase a house, you must pay what's called the land transfer tax. This tax is 1% of the greater of the sale price or the assessed value of the real property. If you are a first-time home buyer, you may be exempt from this tax. For more information, go to http://www.taxandland.pe.ca/index.php3?number=1012256&lang=E
2. Legal Fees. Your lawyer will search the title to the house to make sure there are no outstanding amounts on the property, such as taxes, water, sewer bills or judgements. The lawyer will also draw up the deed and have it registered at the Province Land Registry, as well as the mortgage.
3. Mortgage Fees. Depending on your mortgage lender, they may require an appraisal, survey or plot plan. They will advise you of this when you are looking for financing.
4. Home Inspection. A home inspection is usually done after your agreement is in place and before the title changes hands. This depends on the property and differing circumstances.
5. Oil Adjustment. If the property you are looking to purchase has oil or propane and depending how your contract is drawn up, you may be purchasing a full tank of fuel. The vendor will fill it up before closing and your lawyer will receive the information on how much the tank holds and what the price is.
6. Mortgage Insurance. Depending on your mortgage ratio (per cent of down payment), you may have to pay mortgage insurance. Check on your lender as to how this will be handled.
7. Miscellaneous costs. If the vendor has prepaid some expenses such as water and sewer, you would rebate him the amount from the day of your ownership to the next billing cycle, this is an item that your lawyer will confirm for you. Other costs that may occur are hook up fees for cable, phone and internet, depending on your service provider.
It seems like a lot which it can be, the best thing to do is go over these items with your REALTOR and your mortgage lender so you know what you are expecting.
Don't forget to check out the PEI Real Estate Report, Thursdays at 8:20 on Ocean 100.3 FM!