Kelowna Broker

Understanding Mortgage Closing Costs

Many homebuyers are startled to learn that after they arrange their mortgage they have to pay a range of additional fees to finalize the transaction.  It pays to be informed, and a mortgage broker can advise you on these closing costs and on how you might be able to lower them.

What Are Your Closing Costs? 
Your exact closing costs will depend on where you live, how much you are borrowing, how you finance your mortgage and your closing date.  Here are some of the most common costs:

Lawyer’s Fees – these vary across the nation.  A mortgage broker can refer you to a lawyer who offers a competitive “legal package.” 

Mortgage Appraisal Fees – lenders require an evaluation of the mortgage lending value of a property.   A mortgage broker should be able to recommend appraisers who will make sure that you get a very competitive price for their services. 

Real Property Report – the legal written or mapped description of the location and dimensions of your land, obtained from an accredited land surveyor.  The report should also show the dimensions and placement on the land of any structure, including additions such as carports and fences. An up-to-date report is often required by a lender as part of the mortgage transaction.

Title Insurance – may be purchased in lieu of a real property report in some cases.  Provides protection against several defects such as problems with the property that would have been revealed by an up-to-date land survey.  Title insurance is also a cost-effective way to protect the purchaser against future title fraud and forgery issues.

High Ratio Mortgage Insurance – needed if you are buying a home with less than 20% down.  A sliding fee scale applies, depending on the percentage of the purchase price required in a first mortgage (some minor exceptions).

Home Inspection Fee – an objective visual examination of the physical structure and systems of a house, which most buyers opt for.  The scope and detail may vary, but most reports outline any particular problems and associated repair costs.

Registration Fees – Fees paid to the provincial government for recording a title transfer, mortgage registration or other instrument such as an assignment or lien with the local authorities.

Interest Adjustment (IA) – Your lender will charge you interest on closing for the number of days between the closing date and the start of your payment cycle.  This can be a sizeable amount.  For example if your payment cycle begins on July 1 and the closing date is June 15, then you will pay for 15 days interest at closing.  This will be an amount that is close to half of the monthly payment.

Property Tax and Prepaid Utilities Adjustments – If the previous owner prepaid property taxes or other utilities, they will be credited the prepaid portion on closing. If they paid all their taxes by June, expect a large adjustment amount on any closing after June.  Your mortgage broker can suggest ways to reduce this adjustment.

What Are Your Options? 
The rules and regulations surrounding the various mortgage fees are complex, and a knowledgeable professional to guide you through the intricacies of closing fees can make all the difference.  An Invis mortgage broker has access to preferential pricing on some fees, and can offer you a wealth of advice on what your closing costs are and how you can minimize any surprises.