25 Jul

What Are Closing Costs?

Mortgage Tips

Posted by: Avaljit Sandhu

 

Have You Accounted for Closing Costs?

Buying a house is an exciting journey, but it’s essential to understand all the expenses involved. One significant cost that often catches buyers by surprise is the closing cost. So, what exactly are closing costs, and how can you prepare for them?

What Are Closing Costs?

Closing costs are fees associated with finalizing a real estate transaction. They include a variety of charges, such as:

  • Appraisal Fees: Paid to a professional to determine the market value of the property.
  • Title Insurance: Protects the lender and buyer from any title disputes.
  • Home Inspection Fees: Paid to an inspector to assess the condition of the property.
  • Property Taxes: Often required to be paid upfront at closing.
  • Land Transfer Fees: A tax paid to transfer the title of the property from the seller to the buyer.
  • Lawyer Fees: Cover the cost of legal services to review and finalize the transaction.

How Much Are Closing Costs?

Closing costs typically range from 2% to 5% of the home’s purchase price. For example, on a $300,000 home, closing costs might be between $6,000 and $15,000. It’s crucial to budget for these expenses to avoid any last-minute surprises.

How to Prepare for Closing Costs

  1. Ask for an Estimate: Your lender is required to provide a Loan Estimate within three days of receiving your application, which includes an itemized list of closing costs.
  2. Save Early: Start setting aside money early in the home-buying process to ensure you have enough to cover closing costs.
  3. Negotiate with the Seller: In some cases, sellers may agree to cover part of the closing costs to facilitate the sale.
  4. Shop Around: Some closing costs, such as title insurance and home inspections, can vary. Shopping around for these services can help you save money.

By understanding and planning for closing costs, you can approach the home-buying process with confidence and avoid any unexpected financial hurdles.

Call 204-914-6812 to Discus your options !

Best Regards,

Avaljit Sandhu

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17 Jul

Affording That Home Renovation.

Lifestyle

Posted by: Avaljit Sandhu

Affording That Home Renovation.

Is your home in desperate need of an upgrade? Are you dying to renovate your bathroom, kitchen, or other space but not sure how to fund this renovation project? Did you find a home you’d like to buy but it needs work?

We’ve got good news! When it comes to covering the costs of renovating, there are some options available to you outside of some good ole savings!

Mortgage Refinancing

One option for funding a renovation could be through mortgage refinancing. Keep in mind, you’ll want to do this at the end of the mortgage term to avoid breaking your mortgage and owing penalties. Some mortgage products may allow you to refinance outside of that, but you will want to check with your mortgage professional. This is best suited to larger-scale renovations or remodels.

  • Refinancing will allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance).
  • Refinancing your mortgage (if approved) will allow you to access funds immediately and tends to have lower interest rates than a standard credit card or personal loan.

Purchase Plus Improvements (PPI) Mortgage

If you haven’t yet bought that home, financing your renovation at the time of purchase with a purchase plus improvements mortgage can save you some hassle down the line. This type of mortgage is available to assist buyers with making simple upgrades, not conducting a major renovation where structural modifications are made.

  • Simple renovations include paint, flooring, windows, a hot-water tank, a new furnace, kitchen updates, bathroom updates, a new roof, basement finishing, and more.
  • Depending on whether you have a conventional or high-ratio mortgage, if it is insured or uninsurable, and which insurer you use, the Purchase Plus Improvements (PPI) product can allow you to borrow between 10% and 20% of the initial property value for renovations.

Financing Improvements Upon Purchase

Similarly to the PPI mortgage solution above, there is another option allowing you to finance your renovation project at the time of a new purchase by adding the estimated costs to your

mortgage with CMHC Mortgage Loan Insurance.

  • You can obtain financing with only 5% down payment for both the purchase of your home and the renovations for up to 95% of the value after renovations!
  • There are no additional fees or premiums and you can earn added rebates for energy-saving renos.

Line of Credit or Home Equity Loans

Lastly, you always have the option of utilizing a secured line of credit or home equity loan to pay for your renovation.

  • Securing your renovation loan against the equity in your home can typically be up to 80% of the property value; accessible at any time. This will typically provide lower interest than non-secured financing and allows you to access funds at any time.

If you’re looking at doing a small or large renovation this year, make sure to reach out to your DLC Mortgage Expert before you start to ensure you’re making your money and mortgage work for you!

8 Jul

July 2024 NEWSLETTER

Latest News

Posted by: Avaljit Sandhu

Welcome to the July issue of my monthly newsletter!

Things are starting to heat up as we head into July! For those first-time buyers looking to purchase a home, I have all the details for you below! For those other homeowners hoping to stay cool and enjoy their spaces this season, scroll down for tips on how to turn your backyard into a staycation paradise! Have a great summer!

Entering the Housing Market

With the first Bank of Canada rate drop having occurred in June, many individuals are looking at the housing market with renewed vigor and an expectation that rates will continue to come down to a more sustainable level.

 

If you are someone who is considering entering the housing market this summer, there are a few things you should keep in mind:

Determine Your Budget: Download my app from Google Play or the Apple iStore to help you calculate mortgage payments, affordability, the income required to qualify, and even estimate your closing costs! It also allows you to connect directly with me through the app so that I can answer any questions you have right in the palm of your hand.

Save For a Down Payment: Your typical down payment should be at least 5% of the purchase price, though 20% down is preferable as anything below that requires default insurance. Your down payment can be done through your own savings account or RRSP’s.

  • Thanks to the Federal Government’s Home Buyer’s Plan, first-time homebuyers can leverage up to $60,000 from their RRSPs (maximum of $120,000 for a couple).
  • PRO TIP: The First Home Savings Account (FHSA) is specifically designed to help first-time homebuyers save for their down payment without having to pay taxes on the interest earned on their savings.

Take Advantage of First-Time Buyer Programs: Did you know? First-time home buyers are eligible for an exemption, reducing the amount of property transfer tax paid, depending on the property’s value.

  • PRO TIP: In addition, Ontario, British Columbia, Prince Edward Island, and the City of Toronto offer land transfer tax rebates for first-time homebuyers.

Get Pre-Approved: 

There are a few benefits to pre-approval such as:

  • It confirms the maximum amount you can afford to spend.
  • It can secure you an interest rate for 90-120 while you shop for your new home
  • It lets the seller know that securing financing should not be an issue. This is extremely important for competitive markets where lots of offers may be coming in.

Understand the Closing Costs: 

Here are a few closing costs to keep an eye out for:

  • Land Transfer Tax: This is calculated as a percentage of the purchase price of your home, with the amount varying in each province. Some cities, such as Toronto, also have a municipal LTT.
  • Legal Fees and Disbursements: You can expect to incur a minimum of $500 (plus GST/HST) on legal fees for the preparation and recording of official documents.
  • Title Insurance: Most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and is typically $300 or more.
  • PST on CMHC Insurance: Though CMHC insurance itself is financed through the mortgage, PST on the insurance is typically paid at the lawyers and sometimes deducted from your advance.
  • Home Inspection Fee: A home inspection is highly recommended as a condition of your Offer to Purchase to prevent any future surprises. This can cost around $500.
  • Appraisal Fee: An appraisal is performed to certify the lender of the resale value of the home in the case you default on the mortgage. The cost is usually $400 – $600 but is typically covered by the lender.
  • Property Insurance: Property insurance covers the cost of replacing your home and its contents, and must be in place on closing day. This is paid in monthly or annual premiums.
  • Prepaid Utility Bills: You may need to reimburse the previous owner of your property for prepaid costs such as property taxes, utilities, and so forth.
  • Property Taxes: Property taxes are due on an annual basis and are calculated as a percentage of the home value and vary by municipality. You also may need to reimburse the previous property owner if he/she has already paid property taxes for the full year.

Getting Proper Coverage: 

Various insurance items can be obtained for your home, including:

  • Title Insurance: Required by most lenders to protect against losses should a property ownership dispute arise. This insurance is done through your lawyer/notary and typically runs $100-$300.
  • Mortgage Protection Insurance: An optional debt replacement that protects your family should anything happen in the future. Many homeowners believe they are covered through their life insurance policy, but the Manulife Mortgage Protection Plan is different. Before closing, it’s important to look at the costs and coverage for you!
  • Property & Fire Insurance: Mandatory and needs to be arranged before your closing appointment. Not sure how much to budget for? Get quotes from various insurance companies! Your lawyer/notary or myself can provide recommendations
  • Default Insurance: Only required if you purchase a house with less than a 20% down payment.

Whether you’re looking at a condo, townhouse, rancher, or a two-story property, there is nothing quite like your first home! However, the mortgage process can be intimidating – and that’s where I come in! If you’re looking to get started on your home-buying journey, don’t hesitate to reach out to me today.

Best Regards,

Avaljit Sandhu

Mortgage Professional