Real estate is a significant investment which needs careful budgeting, when you’re talking about commercial real estate, careful budgeting alone is not enough. It’s important to understand the fees and costs beyond the mortgage. So here are 6 common hidden costs that should be considered before you buy commercial property.
These are charges paid to a solicitor who specializes in real estate. Buying a property will need a lot of processes such as acquiring paperwork, mortgage contracts and title deed registration. In times like this, it is very important to have an experienced attorney who will handle these processes to avoid unforeseen risks. The lawyer also helps to negotiate alterations to a contract like extensions, adjustment to utilities and taxes or granting of a license for the occupation of a property before full settlement. This fee is also called ‘notary fee’ in countries like Canada, USA and Australia.
Land Transfer and Property Taxes
When you buy a property from its owner, this is the tax of ownership transfer which is paid to the government. In Canada, this varies from one province/city to another. The measure of the taxes paid varies according to the prices of properties and based on the province. The payment is in the range of 0.5% to 2.0% depending on the price of the property. Before you buy a property, you should contact your real estate agent about the amount of land transfer tax in that area.
Mortgage Insurance Fees
When a buyer is unable to meet up with at 20% of the value of the property, then mortgage insurance becomes mandatory. The fees are paid every month. A high ratio mortgage is a mortgage with about 5-15% down and it comprises of 0.5-3.5% of the total amount of mortgage. Also, it is best for you to arrange a mortgage with a mortgage broker to make it less stressful for you. You will only be charged with a finder fee. For mortgage advice be sure to consult with the experts at Owemanco.ca.
Title Insurance Fees
This fee helps to prevent risks that are title-related. Issues like title defects can affect the ownership or marketability of a property in the future. It resolves disputes on vendor’s rights, trespasses and encroachment. Also, fraudulent discharge mortgages and uncertain heirs (who may want to claim ownership) are well covered by this insurance. Its value is 1% of the purchase price.
Utilities and Repairs
Expenses such as water, light and other important components on the property should be expected and taken care of when the need arises. It is also important to know the utility bills of the previous owner of the property. If the taxes they paid were in excess or did not elapse during the duration of their ownership, then they should be credited with the money left. Money should be saved to cover security system, Home (Property)-owners Association (HoA) fees, and other important things that will need repairs.
It is important to have your property inspected for some unknown defects especially if you are buying a used property. The fees for this inspection vary. Deficiencies that need to be fixed will be spotted and other important areas that need repair will be attended to.