Carrying costs vs. closing costs
By: Sandra Rinomato
Looking to buy a new home? You may want to start out by making a list of costs involved, including moving costs, legal fees, and even re-decorating expenses. There may also be additional costs associated with leaving your rental residence, or mortgage discharge fees.
One of the areas where homebuyers most frequently run into problems is with closing costs. Homebuyers often do not properly anticipate the costs associated with closing a real estate transaction, and the resulting cash crunch can add stress at a time when you need it least.
In addition to your down payment, there are many other expenses that must be paid on closing day or before your home purchase can be completed. Closing costs are typically one-time-only charges that are required to complete -- or close -- the transaction. These costs may include home inspection fees, bank appraisal fees, title insurance, lawyer's fees, and applicable taxes, such as GST and your proportionate share of property taxes, utilities, oil etc. that may have already been pre-paid by the Seller. You will be required to reimburse the Seller for those costs relating to the property after your closing date. A large portion of closing costs are the Land Transfer taxes--the calculation is based on the purchase price. Your CMHC fees can be added to your mortgage if you don’t have the money to pay upfront. Those are the fees associated with mortgages that are greater than 75% of the purchase price. There may be other costs that will be necessary to complete your transaction and your Realtor will help you plan in advance in order to avoid an expensive surprise.
Carrying costs, on the other hand, are those expenses that are routinely incurred for the ongoing operation and upkeep of your home. These costs include such items as your mortgage payment, property taxes, heating costs, home insurance, utilities, maintenance costs, etc. Your Realtor can help you estimate many of these costs from the information on the listing and by asking the Sellers a few questions. Your mortgage payment is another cost that can be estimated prior to making an offer to purchase and is one of the calculations that you should know right from the beginning.