Closing Costs with the Canadian Mortgage App
Are you looking to buy a home? Then you’ll want to budget for closing costs. Let’s look at closing costs, how much you should budget for them and how the Canadian Mortgage App can help.
What are Closing Costs and How Much?
Closing costs are the extra costs associated with buying and selling a property. Also referred to as transaction costs, these are the one-time expenses you must pay if you want to reap the rewards of being a property owner. Closing costs are in addition to your deposit and down payment.
Lenders typically want to see that you have saved at least 1.5% of the purchase price towards closing costs. If you’re buying an $800,000 home, the lender will want to see that you have at least $12,000 saved (1.5% of $800,000). Although keep in mind that closing costs may amount to more or less than this, depending on the location of the property you’re buying.
What if I Don’t Have Closing Costs Saved?
If you don’t have enough for closing costs and still want to buy a home now without waiting to save up enough, there is no need to worry. The good news is that you have options.
The first option is to use some of your RRSP funds towards closing costs. Under the Home Buyers’ Plan (HBP), you can withdraw up to $35,000 from your RRSP tax-free towards purchasing your first home. Many assume you must use the funds towards your deposit and down payment. While you can, you don’t have to. You can essentially use your RRSP funds towards whatever you want. You can use them towards your closing costs. You can even use them for new furniture. It’s entirely up to you!
A cashback mortgage is the second way to come up with enough money to cover closing costs. Cashback mortgages are what they sound like. A cashback mortgage is a mortgage that provides you with cashback when you take it out. With that cashback, you can use it towards whatever you want. This includes closing costs. There is a cost associated with this, though. You’ll most likely pay a higher mortgage rate with a cashback mortgage. However, if a cashback mortgage lets you buy sooner, start building up equity, and stop paying rent, it could be worth it.
How the Canadian Mortgage App Can Help
Using the Canadian Mortgage App’s pre-qualification calculator, you can factor in closing costs for the home you want to buy.
The Canadian Mortgage App is quite sophisticated in this area. You have the option of choosing estimated closing costs or actual closing costs. The App even has a built-in calculator for estimating land transfer tax, depending on where you’re buying. Here’s a training video from Ben where he goes over closing costs in the Canadian Mortgage App.
What are you waiting for? Download the Canadian Mortgage App today to try it out.