Chapter 19: Closing the Transaction
1. List the common closing costs associated with a purchase of a
resale home when a mortgage is used to complete this purchase.
Bob and Mary are purchasing a resale home for $420,000 and are putting 10% down. The CMHC premium is 2.40% or $9,072. The closing costs for this transaction may be approximately:
|
Item |
Cost |
|
Appraisal Fee |
$0 |
|
Closing Adjustments |
$350 |
|
HST |
$0 |
|
Estoppel Certificate Fee |
$0 |
|
Home Inspection |
$250 |
|
Interest Adjustment (based on 10 days at J2=6%) |
$631 |
|
Land Transfer Tax |
$4,875 |
|
Legal Fees |
$2,150 |
|
New Home Warranty |
$0 |
|
New Hydro Account |
$200 |
|
Property Insurance |
$50 |
|
PST on CMHC Premium @ 8% |
$726 |
|
Title Insurance |
$250 |
|
|
|
|
Total |
$9,482 or 2.26% of the purchase price |
2. What might be the legal fees on a purchase of a $750,000
residential property?
|
Purchase
Price of the Property |
Fees |
|
On the first $100,000 |
$850 |
|
On the excess between $100,000 - $300,000 |
0.5% of the excess amount |
|
On the excess over $300,000 |
0.25% of the excess amount |
Therefore, the total fee would be $850 + $1,000 + $1125 = $2,975.00
3. Under what circumstances is HST charged in the purchase of a
property?
On a new home, HST is charged; however, the builder may include it in the purchase price. If it is not included, it must be paid on closing. In addition, there is a HST rebate applicable to new homes, substantially renovated homes, and modular and mobile homes for which an application must be completed.
4. What tax is charged on the mortgage default insurance
premium?
PST.
5. List the pre-closing and closing procedures that a Lawyer can
complete using Teraview.
· Automated title searching
· Writ searching
· Subsearching
· Creation of drafts and documents ready to be registered
· Calculation and payment of land transfer taxes
· Electronic registration of documents, as well as other procedures.
6. Explain the significance of the Acknowledgement and Direction
in the closing process.
This document allows the Lawyer to close the transaction electronically.
7. What purpose does the DRA serve?
This document allows the Lawyers to handle the client’s documents and funds and by signing this document, both Lawyers agree to undertake their professional obligations as to the handling of these documents and funds.
8. In a title-insured transaction, who remits the insurance
premium to the title insurer?
The Lawyer.
9. Define the IAD.
The IAD is date that the interest adjustment payment is due.
10. Ms. Homeowner is receiving a mortgage for $350,000 on
February 11th. The mortgage bears
interest at a rate of 5.4% per year, compounded semi-annually, not in advance. The mortgage has monthly payments that begin on April 1st. What is the amount of the interest adjustment payment due on March 1st?
28 (number of days in February) – 11 (date of advance) = 17 +1 (add the date of advance) = 18
5.4 SHIFT NOM%
2 SHIFT P/YR
SHIFT EFF% 5.4729
365 SHIFT P/YR
SHIFT NOM% 5.3287751356
350000 +/- PV
18 N
0 PMT
FV 350,920.903452
$350,920.90 - $350,000.00 = $920.903452
Therefore, the interest adjustment payment due on the interest adjustment date is $920.90 (this is not a periodic payment so the amount is rounded off)