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Expert answers to 9 common homebuyer questions about closing costs

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Photos: James Bombales

Buying a home is a major investment and the largest financial transaction most people will make in their lives. In addition to the purchase price, interest rates, and condo fees, homebuyers need to be aware of their closing costs. Expenses such as legal fees, land transfer taxes and insurance can add up, leading many homebuyers to underestimate the amount of cash on hand that they’ll need when it comes time to close on the transaction.

To learn more about closing costs and what you should be prepared for, Livabl turned to Ara Mamourian, broker and partner at thespringteam.ca, and David Duncan, vice president, real estate secured lending, at TD Canada Trust to answer our questions.



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1. How much should homebuyers put aside for closing costs?

“As you save for your home, it’s a good idea to build in a 3 to 5 percent of the purchase price as a buffer for closing costs where possible,” says Duncan. “This way, you’ll have funds available if costs end up being higher than anticipated.”

If your final closing costs end up being less than what you put aside. you can put that money towards your mortgage or keep it as an emergency fund to help cover repairs or future renovation projects.

2. When are closing costs paid in a real estate transaction?

“Closing costs are typically paid at the closing of a real estate transaction,” says Duncan. “The closing is when the title of the property is transferred from the seller to the buyer, and the buyer officially takes possession of their new home.”



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3. What are some common closing costs that people should save for?

“In addition to ongoing costs like mortgage payments, property taxes, maintenance and utilities, it’s important to understand all upfront costs over and above your down payment,” explains Duncan. “It’s a good idea to build in a little extra, just in case anything unexpected arises during closing or when you take possession of your new home.”

Examples of common closing costs include property assessments, property surveys, home inspection fees, legal fees, title insurance and moving fees. However, in most cases the land transfer tax amounts to the lion’s share of costs according to Mamourian. “If you’re a first-time buyer, you are eligible for a rebate of the municipal portion of up to $8,475 then legal fees would come in at around $1,800.”

Homebuyers should also be aware of any pre-payments by the seller that may need to be reimbursed. “Sometimes homeowners pay for all their property taxes up front for the year so if you move in half way through the year you’d have to reimburse the seller for that amount,” says Mamourian.



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4. What are some unexpected costs that homebuyers could face?

Unexpected or hidden costs are always a concern for new homeowners so it’s important to plan ahead and build a buffer into your budget. “As you get closer to buying a home, consider taking your monthly mortgage payments for a test-drive by making an automatic transfer of that amount into a TFSA or other high-interest savings account for a few months,” suggests Duncan. “This two-fold approach allows you to see how comfortably you can pay off the monthly mortgage and save extra money for unexpected costs that could arise, while also helping you save for a larger down payment.”

In rare instances a special assessment may be required in a condominium when a major repair is needed that surpasses the condo’s collective reserve fund. “Special assessments only happen if something has either gone wrong or if the reserve fund isn’t able to handle a capital expense that the board and residents approve,” says Mamourian. “If this comes into play at closing, it’s not a surprise and the buyer signs up for it.”

When it comes to homeownership, it’s a good idea to prepare for unexpected repairs or maintenance items. “Don’t ever expect to buy a house and have zero expenses,” says Mamourian. “That’s the thing about houses versus condos — most people have this misconception that condo fees are just wasted money but when in reality it’s just a fixed, predictable maintenance cost whereas in a house that annual cost is variable.”

5. Can homebuyers roll their closing costs into the mortgage loan?

“The only closing cost that can be rolled into a mortgage is your CMHC insurance premium,” says Mamourian. “CMHC premiums are payable only by those who are putting down less than 20 percent of the purchase price in cash as a down payment.”

“Homebuyers can always consider reducing their down payment to help cover closing costs however, they’ll end up with a larger mortgage,” adds Duncan.



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6. Do closing costs differ by location?

As mentioned above, land transfer taxes can take up a large portion of your total closing costs but not all land transfer taxes are the same. They can vary significantly by province and municipality. “The City of Toronto has its own land transfer tax on top of the provincial one so buying in Toronto is more expensive not only with the price of properties but also with closing costs,” says Mamourian.

7. Can homebuyers negotiate with sellers to pay the closing costs?

Homebuyers can always try to negotiate on closing costs, but it depends on the market. “In a seller’s market, you can’t be making demands like this,” says Mamourian. “In a buyer’s market, it’s open season, but rather than asking to pay closing costs like you see on TV, it’s usually just built into the offer price and still paid by the buyer.”



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8. What are some tips for how homebuyers can potentially reduce their closing costs?

“The total cost associated with items you’ll need during closing can range, depending on location and who you work with to do the close,” says Duncan. “For example, someone moving within the same province or city should pay less in associated moving fees compared to someone who is moving across the country. The associated legal costs may also vary depending on who you work with and what they charge for closing the transaction so it’s a good idea to contact different firms and ask for quotes.”

At the end of the day, when it comes to closing costs, the most important step is to plan ahead and build a buffer into your total budget.



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9. Is there anything else that homebuyers should be aware of when purchasing a home?

From closing costs and land transfer fees to property taxes and everyday maintenance costs, the price of homeownership is much more than your down payment and monthly mortgage payments.

“Calculate how much you spend each month on everything — rent, groceries, insurance, loans, taxes, entertainment, etc. — to determine what you can comfortably afford altogether and take advantage of helpful tools like TD’s Mortgage Affordability Calculator,” says Duncan. “From there, you can work with a financial advisor to develop a plan that will allow you to save for a down payment, ensure you have money put aside for closing costs and unexpected expenses that may arise, and be able to live the lifestyle you desire in your new home.”

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Is getting an MBA worth it? How to make a decision

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Obtaining an MBA degree requires a significant amount of investment. You’re not only spending money but investing a large amount of time and effort into it.

While preparing for your MBA, it is important to critically access if the benefits of enrolling in a graduate business school outweigh the costs, according to experts. Your current financial capabilities and commitments are key factors to consider before determining whether applying for an MBA is the right choice for you.

According to experts, one great way to weigh the short-term financial benefits of an MBA is to research the average salary of recent graduates of business schools and compare that figure with the average number of student loan debt.

Of all the ranked business schools that provided salary figures in the U.S. News Best Business Schools ranking, the average starting salary among 2018 graduates from full-time MBA programs was $87,683.88. While for 2018 graduates of full-time MBA program at the ranked business schools, the average debt burden was $51,671.90.

For schools that provided both salary and debt figures, the average salary for MBA graduates was $86,253.72—167% higher than the average debt burden at those schools.

Mike Catania, the founder of the coupon website PromotionCode.org and a student in the executive MBA program at the University of California—Los Angeles Anderson School of Management, noted that one of the major reasons he chose to attend business school was a strong desire to expand his network.

“I got exactly what I wanted – access to brilliant classmates and faculty that I would never have encountered on my own,” he noted. “It’s difficult to ascribe a value to that, but I look at it as only temporarily intangible – the relationships forged over the next few years will positively affect my opportunities as an entrepreneur moving forward.”

According to a financial ROI report on MBA published by Quacquarelli Symonds—a higher education data, consulting and research company—within 10 years of earning an MBA degree, the average MBA graduates from either a U.S. or international business school had an estimated ROI of $390,751—even after deducting tuition and opportunity costs of attending an MBA program. The report also went further to show that the average decade-long ROI of an MBA graduate from the Stanford University Graduate School of Business is higher than $1 million.

While the financial benefit of an MBA degree is a huge factor to consider, experts also note that there are other non-financial factors to consider, such as if getting the degree would either facilitate career change or accelerate career advancement.

“Often candidates have a career progression in mind – ask whether people who have followed that path have been helped by an MBA,” said Mark W. Nelson, the dean of Cornell University’s Samuel Curtis Johnson Graduate School of Management. “Also, consider your personal opportunities for growth. What do you want to work on? Consider how an MBA would help you develop those capabilities.”

For example, with the future of data analyticslooking bright for data scientists, getting an MBA might be what you need to boost your chances of landing a great job.

Another important thing to consider when deciding to pursue an MBA degree is your current lifestyle. It is a venture that requires serious commitments, said Catania.

“It’s just going to eat up so much of your time, and all of the (business) schools make it abundantly clear that this is on par with a job,” he adds.

Also, Nelson noted that an MBA is best suited for individuals who want to begin a major change in their career path. “An MBA is a good path when candidates are looking for a career switch or a significant career advancement,” he said.

However, Elissa Sangster, CEO of the Forté Foundation—a non-profit organization with a mission to increase the representation of women in business schools and corporate leadership positions—warns that an MBA is not necessary for every type of business career.

“You could trick yourself into thinking you need to go and pursue an MBA because, if you’re going to run a yoga studio or you’re going to … open up a car wash or run a food truck, those are all businesses,” she said.

“Getting an expensive MBA degree may not be a smart financial decision for someone who wants to run a small local business, while it could be a strategic move for someone who hopes to start or manage a large, influential corporation.”

According to Phil Strazzulla, an entrepreneur and the founder of two companies in the software sector – Select Software Reviews and NextWave Hire – who earned an MBA from Harvard Business School, he noted that while it is a chance worth taking, it is one that needs to be carefully analysed.

“Chances are, if you’re thinking about getting an MBA, you are an analytically rigorous person who’s done the analysis on whether it makes sense to pay now for future gains in salary,” he said. “And, if you go to a top school, it undoubtedly is. However, the other way I’d recommend thinking about your decision is how it’ll impact your overall happiness.”

Furthermore, SiqiMou, the co-founder and CEO of the tech-driven beauty company HelloAva who earned an MBA degree from Stanford, notes that one of the key advantages of attending a high-quality business school is that it provides exposure to a wide array of career opportunities.

“I would say the advantage of coming to one of these relatively prestigious business schools is that you have a lot of options that are open to you,” she said. “You can go back into finance or consulting types of jobs, or you can also start something yourself.”

Bachenheimer, a clinical professor of management at Pace University’s Lubin School of Business in New York City, added that an MBA provides project-based learning activities that allow students to practice solving real business problems.

“An MBA can be much more than the knowledge and skills acquired through coursework; it can truly expand you and your world,” he said.

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Comment se protéger des risques associés à l’utilisation des outils bancaires

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La technologie financière est en constante évolution. L’introduction continuelle de nouvelles options bancaires en est la preuve.

Fintech (abréviation de technologie financière) est un terme qui désigne tout type d’innovation technologique utilisée pour soutenir ou fournir des services financiers. Une telle innovation entraîne des changements importants dans le secteur financier, et donne naissance à une gamme de nouveaux modèles d’affaires, d’applications, de processus et de produits.

Si les applications financières vous permettent d’accéder facilement à vos finances personnelles, elles peuvent aussi comporter des risques allant du vol de vos renseignements bancaires, tels que votre numéro de carte de débit ou de crédit, votre nom d’utilisateur et votre numéro d’identification personnel.

C’est pourquoi il est important d’être très vigilent en partageant vos informations personnelles et bancaires en ligne. Saviez-vous qu’en fournissant vos informations bancaires ou de carte de crédit à une application financière, vous pourriez risquer de violer l’accord d’utilisation de votre institution financière?

Ce qui veut dire que, quelles que soient les caractéristiques de sécurité mises en place par une application financière, votre institution financière peut vous tenir responsable en cas de vol et d’utilisation de vos renseignements personnels à votre insu ou sans votre approbation.

Voici quelques conseils pour vous aider à protéger vos informations personnelles et bancaires, ou celles de votre carte de crédit lorsque vous utilisez les applications financières :

  • Vérifiez l’accord d’utilisation de votre banque avant de partager vos informations personnelles et bancaires, ou de carte de crédit à travers les applications financières.
  • Consultez la politique de protection contre la fraude de votre institution financière pour savoir qui est responsable de toute transaction non autorisée par vous-même .
  • Cherchez à comprendre quelles mesures de sécurité sont en place et comment vos renseignements personnels pourraient être utilisés.
  • Vérifiez régulièrement votre dossier de crédit pour voir s’il n’y a pas de demande de crédit que vous n’avez pas faite ou encore une transaction que vous n’avez pas effectuée.

Si vous soupçonnez que vos informations ont été compromises, changez immédiatement vos mots de passe. Examinez vos relevés de compte et de carte de crédit pour y détecter toutes anomalies, et signalez toute transaction suspecte à votre institution financière.

Vous pourriez aussi commander et vérifier votre dossier de crédit.

Visitez le site web de l’Agence de la consommation en matière financière du Canada pour de plus amples renseignements sur les risques associés au partage de renseignements bancaires sur des applications financières à canada.ca/argent.

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Comment agir efficacement en cas de fraude

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Chaque année, des milliers de Canadiens perdent des millions de dollars à cause de fraudeurs. Adolescents, aînés, gens d’affaires, tout le monde peut en être victime. Pourtant, seulement 5% des fraudes sont signalées aux autorités.

Si vous avez été victime de fraude, la meilleure chose à faire est de le signaler aux autorités concernées, et peu importe son ampleur. Ne vous sentez surtout pas honteux d’avoir été piégé car vous n’êtes pas seul à être tombé dans le panneau. En rapportant cette fraude, vous allez aider d’autres personnes à ne pas en être victime. De plus, dans la plupart des cas, l’institution financière ouvrira une enquête et vous remboursera l’argent perdu.

Gardez en tête que protéger vos renseignements personnels est essentiel pour éviter la fraude. Voici comment agir si vous suspectez une transaction inhabituelle dans vos comptes :

  • Changez immédiatement votre NIP et signalez la fraude à votre institution financière et au Centre antifraude du Canada. Informez-les également de toute correspondance suspecte que vous recevez au sujet de vos comptes.
  • Lorsque vous communiquez avec votre institution financière, assurez-vous d’utiliser le numéro de téléphone figurant sur votre relevé de compte ou au verso de votre carte de crédit ou de débit.
  • Si vous recevez des courriels trompeurs, vous pouvez envoyer une plainte au Centre de signalement des pourriels. Les escroqueries financières comprennent souvent des offres de vente ou des promotions de produits et services financiers, comme les régimes de retraite, les fonds de placement gérés, les conseils financiers, l’assurance et les comptes de crédit et de dépôt.

Le Bureau de la concurrence du Canada dispose d’un excellent guide appelé le Petit Livre noir de la fraude, et fournit beaucoup d’autres renseignements utiles par l’entremise du Centre antifraude du Canada.

Pour plus d’information, visitez le site web de l’Agence de la consommation en matière financière du Canada qui offre également une foule de renseignements et d’outils pour vous aider à vous protéger contre les fraudes et les escroqueries à canada.ca/argent.

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