Computing Your Home Mortgage Costs

Buying your own home can be the most exciting event in your family’s life and it can be the most expensive purchase as well that you need to consider all your costs before applying for a mortgage.

Deposit: You’ll still have to come up with a deposit which is generally at 20% of the property’s purchase price. This amount will be deducted from the total purchase price before computing the interest and other charges of the lender.

Home inspection: This is an examination of the structure and systems of a home such as its heating and air conditioning, plumbing and electrical set up. As a buyer, you’ll want to know about potential issues and problems before buying property to decide whether you want to shoulder the improvement costs or negotiate a price adjustment with its seller.

Appraisal fee: An appraiser is an independent third party who can provide a report on the estimated fair value of the property you intend to buy and charge a fee for this. You’ll need this service to ensure buying at the best price possible.

Legal fees: You’ll have to shoulder the fees of your lawyer or conveyancer acting in your behalf in the purchase of your home. Fees can vary significantly so it’s best to shop around or ask your agent for a referral.

Title insurance: This is a policy that protects you against a defect in the title of your property.

Home and Contents insurance: This protects your property and possessions against damage or losses arising from fire.

Stamp Duty: This is a one-time tax computed as a percentage of the purchase price of the property and/or mortgage amount.

Closing costs: This may amount to 1.5% of the basic purchase price.

Other costs include prepaid property tax, homeowner’s insurance premium, rubbish disposal fees and survey charges.

With all the related costs of getting a mortgage, you’ll want to consider some ways to reduce your debt. The key is to decrease your principal debt so you decrease your interest obligation as well through any of the following methods:

* Increase payment frequency by paying bi-weekly instead of bi-monthly

* Prepay your debt when your means permit it by availing of prepayment features of your mortgage

* Increase your monthly payments by rounding off amounts or adding a specific amount to all

By increasing your payments and payment frequency, you can significantly reduce your interest payments and shorten your amortization period, leading to additional savings.