April 16, 2020

Closing Costs when buying a house or condo

In addition to the mortgage, and down payments, anyone buying a house or a condo will need to come up with 'Closing Costs'.

These include legal fees, Land Titles Taxes, Property Taxes and Home Insurance costs, in addition to possibly others.

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[00:00:00] When buying a house or condo, what and how much are closing costs? We'll look at that next. [00:00:05][5.4]

[00:00:09] You're listening to the Bo Knows Real Estate Podcast tips and advice for home buyers, sellers and owners with award winning Remax agent Bo Kauffmann. [00:00:19][9.9]

[00:00:25] So in this episode, I want to take a look at what the additional costs are when buying a house or condo. And what we're going to see that it doesn't really matter whether it's a house or a condo. The costs are virtually identical with just the one main exception. And these are also the costs that a buyer has to come up with in the form of cash. They cannot be lumped into the mortgage or in the form of a loan. You could have an overdraft in your checking account that you used to pay for these, but basically you have to come up with that money at the time of possession. [00:00:56][31.5]

[00:00:57] So we're not talking about CMHC fees. Those can be lumped into the purchase price. So, for example, a 300,000 dollar house fee putting five percent down your mortgage, you would expect it to be 285,000. That's three hundred minus 5% leaves two hundred eighty five thousand. However, with CMHC fees, you're going to quickly find that your mortgage is actually in the low to ninety two, ninety three, something like that. So we're not talking about those costs, we're talking about the additional costs you have to come up with at the time of possession. [00:01:28][31.0]

[00:01:29] And they are basically four different things. First one is legal fees. We're going to talk about land titles, transfer tax. We will talk about property tax and home insurance. Now, there are other things like a mortgage insurance, which is optional. There's moving costs if you choose to do those. But those first four are pretty much mandatory. You have to have home insurance. You have to pay the taxes, the legal fees and the property taxes as well. [00:01:57][28.0]

[00:01:58] So let's take a look at legal fees first. If you Google legal services. I'm sure you're going to find lawyers advertising, you know, a 399, 499 to buy a house. But there's fine print involved in all of those. And that is plus disbursements. And it's those disbursements that are really going to add up. What are disbursements? [00:02:18][20.0]

[00:02:19] Anything from office fees, secretarial fees, photocopying rubber bands and staples all the way up to registering the mortgage on the title, which is usually about $200 and getting title insurance. Highly recommended. And that's about 250 to 300 dollars. So by the time it's all said and done, a buyer should budget between 12 and 15 hundred dollars for legal fees when buying a house or a condo to air on the side of caution. I would even advise to budget around fifteen hundred dollars. [00:02:53][33.9]

[00:02:56] The next thing is the dreaded land titles transfer tax. And I used to think that Manitoba was the worst in Canada, but I recently talked to somebody who's moving to British Columbia and their rates are pretty much the same. So this these rates were set many decades ago and that's why you have things like or the first thirty thousand dollars are free, while $30,000 might have bought a house in the late 60s or mid 70s even, but certainly not today. So as a baseline, let me tell you that a 200,000 dollar house costs $1,720. This is a one time payment, and every dollar above two hundred thousand will cost you two percent. So two hundred thousand is seventeen twenty three hundred thousand dollar house will cost you $3,720 three hundred and fifty thousand dollar house will cost you $4,720. So basically every fifty thousand above that is another thousand dollars. It adds up quickly, especially if you're buying like a half million dollar house and you're you're talking about quite a significant amount of money that you have to come up with on possession date. [00:04:00][64.0]

[00:04:03] Next is the property tax. And that's really a little bit more difficult to put in because it really depends on when you take possession. Pretty much worst case scenario is if you take possession halfway through the year, you'll have to pay half the year's property taxes. If you take possession earlier in the year, well before June, you're going to get a rebate or a refund from the current seller, but then you have to pay the full year's taxes in June. But you you have that money back that the seller gave you. So at least you have some assistance there. And if you take possession and let's say September, you're you basically only have to pay three months or four months that you're going to be living in the house. So this really depends on what the yearly rate is for the house, the neighborhood, et cetera, et cetera. It's safe to say that it's going to be several thousand dollars in most likelihood. [00:04:57][54.5]

[00:04:58] So the three things that we've talked about thus far is the legal fees, the land titles transfer tax and the property tax. And it's interesting to see that all of those are pretty much identical for houses and condos, land titles, fee doesn't matter whether you're buying a house or a condo. Property tax rates in Winnipeg are exactly the same for a house and a condo. The mill rate and all that kind of stuff is calculated to the. Value in everything else, so condos are rated the same rate as a house. And same with legal fees in most cases, unless there might be some minor differences. But they're pretty much the same between a house and a condo. [00:05:35][37.4]

[00:05:36] Where there is a difference is in home insurance. Home insurance in Winnipeg. Again, depends on the value of the house and the neighborhood. If if you're buying in a somewhat depressed or rougher neighborhood, rates might be a little higher. Also, if you're buying a really old house. Rates. Surprisingly, me by might be a little higher depending on the electrical service you have, the type of plumbing you have, etc. But you definitely got to set aside between a granddad. Fifteen hundred dollars for your average house insurance. Where that differs from condo is your condominium building is already insured as part of the condo fees that you pay every month. So you don't have to insure your building. You just have to insure your contents. What's called a content upgrade insurance for your condominium. Depending on whether it's a townhouse or or a high rise, your costs are likely to be around two hundred and fifty dollars a year as opposed to a thousand. So when you add all these costs up, banks usually tell the buyer to have between 2 two and a half percent, maybe even as much as 3 percent of the cost of the house is going to be your closing costs. [00:06:46][69.9]

[00:06:47] So if you're buying a $300000 house, make sure you have at least six thousand dollars to cover the closing costs. Now there are some optional fees. One of them is, course, called mortgage insurance. Have a separate episode talking about that, the difference between mortgage insurance and life insurance. This is definitely optional. A bank has to offer you mortgage insurance, which is basically a form of life insurance that if you pass away, the mortgage gets paid off. Sounds like a really good thing, but there are a multitude of reasons why life insurance is actually preferred. Better, cheaper and know it's a better option than mortgage insurance. The other the other thing that you might consider is hiring a moving company to help you move depending on how old you are and how much stuff you got and how energetic you ha moving companies will cost you another depending on the size of the house. You could be another thousand dollars or so. So I hope this was helpful. These are the closing costs when buying a house or a condo. Not just in Winnipeg, but these were specific to Winnipeg costs. And if you found this helpful, next time you were looking to buy or sell a house. Give me a shout. [00:07:51][64.4]

[00:07:52] And hey, if you're still with me at this point. Why not grab my free podcasting app available for ISIS and Android device? It's super easy. Just go to Winnipeg. Got tips? Slash Apple or slash Android. That's Winnipeg. Dot t I.P.S. Slash Apple or slash android. That way you'll never miss another episode about Winnipeg real estate or both. [00:08:14][21.8]

[00:08:18] You've been listening to Bo Kauffmann of RE/MAX performance realty, are you thinking of buying or selling a house or a condo in Winnipeg called WBO at 2 0 4 3 3 3 2 2 0 2? [00:08:30][11.8]

[00:08:30] Remember, Bo knows real estate. [00:08:30][0.0]


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