Understanding Closing Costs

Buying a home is one of the biggest investments you'll make in your life. And one of the things that you need to consider is the cost of closing the property. The closing costs are the list of costs that the lawyer presents to you at closing.

And it's really important that you know what they are because you don't want to be left with a surprise.

The main closing costs when you're closing a home include such things as land transfer tax, the legal fees and also there are taxes on the high ratio insurance premium that you may have to consider if you have put less than 20% down payment.

One of the main things that clients will not know up front are the adjustments. These are costs that the vendor has prepaid such as property taxes and the utilities.

When purchasing a newly constructed home from a builder, there are other costs to consider such as the new home warranty. And there are other costs built into the offer such as driveway paving or tree planting and these can vary from offer to offer and from builder to builder. It's very important to read the offer carefully so that you're not surprised when you're going to close the home and there are other costs that you haven't put into consideration.

~Thanks to Stephanie for the great information.  You can find out more at the RBC Advice Centre or just contact me.

New Mortgage Rules - What They Mean for Canadians

You may have heard about a new set of changes to Canada's mortgage rules for government-backed insured mortgages, recently announced by the Canadian government. If you're planning on buying a home or refinancing an existing home, it's important to understand how these changes may affect your plans. So here's an outline of the new changes announced by Finance Minister Jim Flaherty and how they will affect your home financing options.

Effective March 18th 2011

Maximum amortization period reduced
First, the new rules will reduce the maximum amortization period (this is the length of time it takes to pay off a mortgage) from 35 years to 30 years. This change has been introduced in an effort to encourage homeowners not to stretch themselves too greatly when purchasing a home, especially as interest rates are expected to rise in the future. By reducing the amortization period the amount of interest homeowners pay will also be reduced over the life of their mortgage.

Refinancing maximum reduced
The government is also lowering the maximum mortgage amount for refinancing to 85% of the appraised value of their properties from the current 90%. This means, for a home worth $300,000, you will only be able to access up to $255,000 when refinancing, compared to $270,000 before this regulation takes effect. If you're in a position where you wish to consolidate debt, refinancing is still an option available to you, and one that often saves you money on interest costs. This new regulation simply seeks to ensure Canadians maintain more equity in their homes in the future.

Effective April 18th 2011

Limiting insurance backing on Home Equity Lines of Credit
In recent years home equity lines of credit have been increasing in popularity and as a result there has also been an increase in household debt. Home equity lines of credit allow borrowers to make repayment of the principal balance as they see fit. Because of this many borrowers pay these loans on an interest only basis which may encourage them to carry debt that never gets paid off. Because these loans also offer variable interest rates, they also expose borrowers to an increase in interest costs, should rates go up. Because of these factors the federal government will withdraw government-backed insurance for non-amortizing lines of credit secured by homes. Loans that do have repayment terms will still be eligible for government insurance.

These government changes have been introduced to ensure that the housing market in Canada continues to be stable, as well as to encourage Canadians to avoid overextending themselves financially.

So what does this mean for you? If you're buying a new home, considering refinancing your home, or looking for ways to consolidate other debt, give us a call. We're happy to walk you through what impact, if any, these changes may have on your individual situation. Or if you'd like to learn more, there are additional articles and videos available about home financing, managing and reducing debt, and credit options.

Thanks to the RBC Advice Centre for this and other great information!