Mortgage Horror Stories - Part 1 (Closing Costs)
Ayden Byle
High achieving Sales Person with executive references. Specialties - Healthcare/Tech. As Sales Lead, built sales teams, processes and strategies for various companies that IPO'd or were acquired. Let's Chat!
Recently, I had a good friend of mine over for dinner. As always, the conversation turned to business and in particular mortgages. He told me his personal story that horrified me.
Not that long ago he was working with a mortgage broker who was helping him with a very small 15 thousand dollar equity take out from his home to do a kitchen renovation. For context, him and his wife do quite well for themselves, had a lot of built up equity in their home which they have lived in for a long time and everything was going smoothly. They just felt they would rather pull the 15 thousand dollars equity out of their home to do the kitchen renovation as opposed to using their line of credit which was a much higher interest rate.
In this case they let their mortgage agent handle all the details with very little input or discussion on their end.
Because of their situation they were approved right away. But when they received their cheque the amount was only $2,900! As you can imagine they were shocked. The whole reason they were even considering an equity take out was to secure 15 thousand dollars for the kitchen renovation.
In this case the closing costs were simply overlooked.
A mortgage process that is handled properly would always include a discussion very early on about each and every closing cost. Communication is key!
Closing costs may include:
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-A home appraisal
-Lawyer fees
-Breakage fees on your present mortgage
-Admin and up-front fees if refinancing with a new lender
-Land transfer if it’s a new purchase and of course your down payment
There are also a number of other miscellaneous fees to be paid upfront that your mortgage agent can share with you like PST on a CMHC insured mortgage or title insurance costs; this way all parties are prepared.
The general rule of thumb is that closing costs will be in the 1.5% to 4% range on new home purchases
Understanding all the fees is a very important aspect of any mortgage lending process, especially if cash flow is of concern for particular borrowers. But with the right approach and a good mortgage agent to work with, they needn’t be a stress or a surprise at close.