Closing Cost (pre-Con) - What else does it contain ?

[Seesus]

Happy Family day every one

I am sorry in advance if this has been asked before, i am just trying to work my numbers and am not quite sure how to work them in order to prepare for the closing. I am first time home buyer and have bought a Condo worth apprx. 300 K closing in 2013.

What costs am i looking at to close this preconstruction, I part of ltt comes back to the first time home buyer - what other rebates can i take use of being a first timer ?

I do not have a cap on my closing costs with the builder and i am hearing educational levies, tree planting charges and a number of other variables ?

Any and all hints will be great as i was thinking of compiling a total list of costs i am looking at versus estimated rebates i will clear on this at the time of closing.

Thank You all.

 

[drewp]

Every builder will have specific fees that they defer to the buyer. It is hard to say because each project will be differ. I would set aside $7000-$10000 just to be safe.

 

[Seesus]

Every builder will have specific fees that they defer to the buyer. It is hard to say because each project will be differ. I would set aside $7000-$10000 just to be safe.

Thank You drewp - and this (potential) 10K of expense is pure addition to my cost on top of what i paid for the condo. Also this assumption excludes the the LTT etc that i will have to pay part of which i can claim back ? would that be right ?

 

[drewp]

I included LTT which on a $300000 purchase should be $975. The rule of thumb with pre-construction is that you will probably spend 2-2.5% of the purchase price if you are not capping the closing costs. It is really hard to tell, because there is so much fine print on builders contract. Realistically you should be below $7000 but it is good to prepare for the worst case scenario.

 

[Seesus]

I included LTT which on a $300000 purchase should be $975. The rule of thumb with pre-construction is that you will probably spend 2-2.5% of the purchase price if you are not capping the closing costs. It is really hard to tell, because there is so much fine print on builders contract. Realistically you should be below $7000 but it is good to prepare for the worst case scenario.

Thank You drewp - that clears this a bit in my head in terms of the funds i should be keeping aside for closing. Much appreciate your input

 

[AKS]

Don't forget, there's the phantom rent as well.

 

[Rocky]

Don't forget, there's the phantom rent as well.

You are correct AKS - that would be another big unknown variable that would be contributing to the over all cost of the condo

 

[drewp]

Phantom rent is different from closing costs.

 

[cityplaceguy]

Yes it is important to have sufficient funds for the closing, and it can vary from builder to builder. Also have a good lawyer, I know some that are not too expensive and this can save you some money as well. On another note when you will be looking for a mortgage dont forget to shop around as rates vary, forget the big banks and deal with a independant brokerage, let them shop around for the best deal.

Im never too busy for your referal!

 

[Exodus]

Phantom rent is different from closing costs.

correct, but still valid to consider. Since you would not be able to get a mortgage when you assume occupancy, you would need to consider the monthly occupancy fee when saving up for closing.

 

[drewp]

Phantom rent is usually cheaper than your mortgage. Maintenance fees, property taxes and additonal fees usually don't equate to the same as a Mortgage.

 

[interested]

I am curious about this statement DrewP.

One pays a mortgage of the builder according to the prevailing rates and my understanding is the mortgage is usually higher than what an individual can get. As well, if it is for a principal residence or non investment property, the mortgage / interest payments are not deductible so unless once can get a better after tax return on this money, paying the mortgage of the builder is unwise.

Phantom rent as I understand includes an amount for the builders mortgage, the maintenance fee which is set and the same whether you pay it or it is included in the phantom rent, property taxes are low but the builder will guestimate what they should be and collect based on this.
I am not aware of "additonal fees" but surely whether you pay off or include in the phantom rent, it would be the same. Could you please explain what "additional fees" you are referring to.
Having never had a mortgage on a Precon, I am just speculating. Could you please clarify if some of my assumptions are incorrect.

 

[Wooba]

Phantom rent is based on your purchase price minus your down payment. If you put a lot down then your rent could be very low.

 

[drewp]

I am curious about this statement DrewP.

One pays a mortgage of the builder according to the prevailing rates and my understanding is the mortgage is usually higher than what an individual can get. As well, if it is for a principal residence or non investment property, the mortgage / interest payments are not deductible so unless once can get a better after tax return on this money, paying the mortgage of the builder is unwise.




Phantom rent as I understand includes an amount for the builders mortgage, the maintenance fee which is set and the same whether you pay it or it is included in the phantom rent, property taxes are low but the builder will guestimate what they should be and collect based on this.
I am not aware of "additonal fees" but surely whether you pay off or include in the phantom rent, it would be the same. Could you please explain what "additional fees" you are referring to.
Having never had a mortgage on a Precon, I am just speculating. Could you please clarify if some of my assumptions are incorrect.

The Condominium Act allows a developer to charge tenants for three main expenses in the period between occupancy and condo registration: property taxes, a prorated share of common operating expenses and interest on the unpaid balance of the purchase price. The builder cannot be out of pocket at this time so it could vary from different project.

That interest rate is based on what the Bank of Canada says is the rate for one-year mortgages.

 

[interested]

So drewp, if I understand: the prorated share of common operating expenses which would essentially be the predicted condo fees; the anticipated property taxes since the property won't be assessed and will be low, and then the 1 year mortgage rate. So unless one can invest the difference between down payment and purchase price for more after tax than the 1 year mortgage rate, it becomes a costly venture and better to increase the amount of payment at occupancy (realizing you risk all the money if the builder went belly up in between) occupancy and closing.