19 Apr 2019

First-time Homebuyers in Sarnia: Beware Closing Costs

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First-time Homebuyers in Sarnia: Beware Closing Costs

Additional Costs in the Sarnia Real Estate Market

Buying a home in Sarnia is expensive, there is no question about that. Your home will be the single largest purchase of your life, and you will have to set aside plenty of cash to pay that mortgage every month. However, for first-time homebuyers in Sarnia, buying a house is more than just that mortgage payment. There are plenty of other closing costs to consider when in the Sarnia real estate market.

Often, first-time homebuyers in Sarnia don’t think of these costs when they are ready to purchase. They are thinking of the downpayment they will need and the pre-approved number their mortgage broker gave them. But far too often they forget the rest of the costs that come with closing on a house. Those costs can add up quickly and leave you house-broke before you even get the keys.

Be prepared when you are ready to enter the Sarnia Real Estate market and beware of these closing costs when buying.

Land Transfer Tax

Generally, the land transfer tax only applies to resale homes, but it’s one of the highest closing costs there is. When you purchase land, you have to pay a land transfer tax. This provincial and municipal tax is based on the purchase price and varies across provinces. So, what you pay in one part of the province, you may not pay in the Sarnia real estate market.

For first-time homebuyers in Sarnia, however, they can get exempt from paying the land transfer tax through refunds. To qualify for the refund, a first-time homebuyer must not have had any interest in a property before and can claim immediately at the time of registration. For first-time homebuyers, no tax would be paid on a property that is valued under $386,000. Anything over that would get the maximum refund of $4,000 and have to pay the remainder.

Talk to your Sarnia Real Estate salesperson and ask them about qualifying for the refund. This could help you avoid plenty of dollars on closing your property, as long as you are a true first-time homebuyer in Sarnia.

Property Tax

If you own property, you pay a tax on it to the local government. Property tax comes up every year, and they help pay for everything in a city, from schools to streets lights. No property tax is the same, as your tax rate will depend on multiple factors:

  • Neighbourhoods
  • Schools in the area
  • Lot size
  • Type of House

Your property is assessed every year, which you can appeal if you believe it is too high, and then it is multiplied by the mill rate, which is established by your local government. Property tax can change yearly, based on the needs of the local community, the mill rate and the assessment of your house. Where first-time homebuyers in Sarnia need to be concerned is that they could be on the hook for property taxes to adjust what the previous owner has already paid. Once the house is yours, check with your local government to see what is available for installment payments of property tax.

Legal Fees

Once both parties have signed the Offer to Purchase, your next step is to get a lawyer to close the deal. Lawyers ensure mortgage paperwork is filed correctly, and ensure your rights are protected through the process. It’s the lawyer who actually hands over the keys when closing is done. There are plenty of real estate lawyers to pick from, and if you need help, ask your Sarnia Realtor for an experienced one to help. With their service, however, comes costs. Lawyer fees range in price, depending on the amount of work being completed, and the attention you receive. It’s best to set aside upwards of $2,000 for lawyer fees, perhaps, even more, to be safe.

Part of their service is to conduct a title search, to ensure the person selling is the legal person selling the property, and that there is nothing against the property. They will often offer you title insurance, which can range from $100 to $300 and is a one-time payment. Title insurance protects residential property owners and their lenders from losses related to the property’s title or ownership. It’s not required to have in Ontario. But it offers protection against unknown title defects, liens and encroachments.

CMHC Insurance

Whatever you plan to put down for a downpayment could affect your closing costs. As a first-time homebuyer in Sarnia, there are programs to help buyers get into the market with as little as five percent down on a home. So for a property running $300,000, you would be required to have $15,000 up front. However, if you put down less than 20 percent, the Canada Mortgage and Housing Corporation (CMHC) will be asking for some insurance. This insurance protects the lender if you default on your mortgage payments.

This is a different closing cost, as you are not required to pay it upfront, but rather, it is lumped into your mortgage payments. But it’s significant enough that first-time homebuyer in Sarnia need to know this is being added to their mortgage. Talk with your mortgage broker and your Sarnia Realtor about this insurance and what it means to you.

Don’t Be Scared as a First-time Homebuyer in Sarnia

There are plenty of other costs, such as appraisals, surveys and inspection fees to pay when closing. And let’s not forget packing, painting, repairing and buying more household items. But don’t let all these costs scare you out of the Sarnia real estate market. Be prepared for them before you buy.

That is why asking advice from experienced Sarnia Realtors, mortgage brokers and lawyers are so important when buying your first home. You don’t want to be caught off guard when you are handed the keys and realize you have no cash left in the bank.

A great rule of thumb is to set aside three to four percent of your purchase price for closing costs. This will cover all the extra expenses you need to get yourself into the property you have been waiting to buy.