I am in the process of buying a house. What is the average closing costs on a house?
Answer:
Most lenders require a minimum 2-3 month advance escrow payment. That is usually the largest chunk of money. Plus there are other fees, title search, legal, homeowners association (if you are moving into a community that has one), etc.
This also varies with the selling price of the property you are purchasing. To be on the safe side, I would plan on reserving 5% of the selling price to cover these costs. If it ends up being less, take the extra money that you set aside to apply toward the principal on your first mortgage payment.
This is something that any GOOD agent or escrow officer should be giving you in advance. It varies from state to state but it is part of their service.
They can be negotiated, you can get the seller to cover all or some of them, typically 3-4% of the sales price though.
The average closing is about $1000.00 - $1200.00. This includes cost of drawing up and registering one mortagage, preparing Land Transfer Tax Affidavit, searching title and disbursments.
Adjustments on Closing
This amount is dependent on how much of the property tax, heating costs, water bill, and any other property expenses the vendor has prepaid.
Land Transfer Tax
Land Transfer Tax is determined by the purchase price of a property as well as the type of property being sold and the residency status of the buyer. If the buyer is a resident of Ontario, then the land transfer tax is based on a sliding scale with the buyer paying a higher percentage of tax on increasing portions of the total value of the property. The following is the Land Transfer Tax scale for the sale of most residential properties.
Purchase Price: $0 - $55,000.00 $275.00
$55,000.01 - $250,000.00 1.0%
$250,000.01 - $400,000.00 1.5%
$400,000.00 + 2.0%
Home Inspection
The average home inspection costs between $250.00 - $385.00. This should include a check of all major systems, written report, and some type of "Home Book". Other prices are available for more or less comprehensive inspections.
CMHC Fees
The actual insurance premium charged is generally added to the principal amount of the mortgage and paid back by the borrower on a monthly basis. There is, however, an administration fee of $175.00 which must be paid for in cash. PST is also charged on insurance premium and must be paid for on closing.
Survey Title Insurance
If a survey is required and is to be paid for by the Purchaser a cost of $650.00 - $1000.00 can be anticipated. Relatively new to the Canadian housing market is the concept of Title Insurance which can be purchased for much less (approximately $250.00) and serves the same purpose as a survey.
Miscellaneous
No house is perfect. Invariably a new owner will want to improve the house in some way or another, even a coat of paint can cost up to a thousand dollars or more. As a rule of thumb one should expect to spend several thousand dollars on minor improvements on a home after one moves in (this figure does not include renovations of any significance.
Moving
It depends on whether or not you hire professional movers, how far a distance must be travelled and how many possessions you own. But even if you have friends/family to help you move, plus renting a wreck and providing pizza and beer for everybody, it will still be a couple of hundred dollars.
Wow, there are so many variables involved in determining closing costs - what you and the seller have negotiated in the earnest money agreement; restrictions based on what type of financing you are obtaining; the sales price; where you are located, etc.
If you have a professional Realtor, he/she should have given you an estimate of loan and closing costs; if not, the lender, by law, must give you a written estimate (RESPA) and should have made sure you understood all before you left the application process. If there is something you don't understand or question, ask - both the lender and the Realtor are making money off your transaction - make sure they earn their keep!
hmmmmmmmmmm....!
It doesn't matter. In today's market, sellers are suppose to pay for the closing costs.
http://money.cnn.com/2006/09/08/real_est.
http://money.cnn.com/2006/09/05/real_est.
Good article when you want to put in bid, negotiation.
http://biz.yahoo.com/brn/060909/19463.ht.
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How to value a property during market downturn?
Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.
Let's use following example:
Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.
If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.
In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.
It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.
Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.
It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.
One may ask, why is there a discrepancy between two perspectives of the buyer and owner?
The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.
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