When buying, selling, or refinancing a home in New Brunswick, closing costs are an essential part of the process. But don’t worry—being prepared can make all the difference. Let’s walk through the details so you know what to expect and can budget accordingly.
What Are Closing Costs in a Real Estate Transaction?
Closing costs are the various fees and expenses that come due when you finalize a real estate transaction. These costs can vary depending on whether you’re the buyer, seller, or homeowner refinancing your mortgage. For buyers, closing costs typically range from 1.5% to 4% of the purchase price, while refinancing could be just a few thousand dollars—often rolled into your mortgage to minimize out-of-pocket expenses.
Common Closing Costs When Buying a Home
- Land Transfer Tax: This tax is based on the purchase price and varies by province and municipality.
Potential cost: A few hundred to thousands of dollars. - Legal Fees: Covering services from a real estate lawyer or notary, including title searches, registrations, and document preparation.
Potential cost: $1,500 to $3,000 or more. - Title Insurance: A one-time fee to protect against title issues, such as ownership disputes. Required by lenders, homeowners can also add additional coverage for themselves.
Potential cost: $150 to $500 or more. - Property Appraisal: Often required for conventional or low loan-to-value mortgages to determine market value.
Potential cost: $300 to $600 or more. - Home Inspection: While optional, it’s highly recommended to identify any issues with the property.
Potential cost: $500 to $800 or more. - Property Tax Adjustments: Depending on the closing date, you might need to reimburse the seller for pre-paid property taxes, or receive a credit if they haven’t been paid yet.
- Mortgage Default Insurance: Required if your down payment is less than 20%, costing between 2.8% and 4% of the mortgage amount. This can be added to your mortgage balance. Note that in New Brunswick, sales tax on this insurance is payable at closing.
Common Closing Costs When Selling a Home
- Real Estate Commissions: Typically 3% to 5% of the sale price, plus applicable taxes like HST, covering the commissions for both Realtors.
- Legal Fees: For the real estate lawyer or notary to verify ownership and clear any liens or charges.
Potential cost: $1,000 to $3,000 or more. - Mortgage Discharge Fees: Charged by your lender to close out your mortgage.
Potential cost: $200 to $500. - Mortgage Pre-Payment Charges: If your mortgage term isn’t up, pre-payment penalties may apply.
Potential cost: 3-months’ interest or the Interest Rate Differential (IRD). - Repairs and Maintenance: Costs for any agreed-upon repairs before the sale.
Closing Costs When Refinancing a Home
- Appraisal Fees: Your lender will require an appraisal to confirm the property’s market value.
Potential cost: $300 to $600 or more. - Legal Fees: Covering the lawyer or notary’s services to verify ownership and register the new mortgage.
Potential cost: $1,000 to $3,000 or more. - Mortgage Discharge Fees: Charged by your current lender to close out the existing mortgage.
Potential cost: $200 to $500. - Title Insurance: Required by your new lender to protect against title-related issues during refinancing.
Potential cost: $150 to $500 or more. - Mortgage Pre-Payment Charges: If you’re breaking your existing mortgage term, penalties might apply.
Get Expert Help Today
Understanding closing costs is key to a smooth real estate transaction. With the right preparation, you can budget effectively and avoid any unexpected financial surprises.
Get in touch with me today for personalized advice tailored to your needs! With my extensive experience and local knowledge, I’m here to guide you through your next real estate transaction. Plus, I can connect you with top-notch Realtors, lawyers, notaries, and inspectors in New Brunswick to ensure all your bases are covered.