When you purchase a home for the first time, there are some expenses to keep in mind that you may not be aware of that you are responsible for when you close on your home. Closing costs typically total 3% to 6% of the purchase price of a home. The recurring closing costs outlined below are not only applicable when you close but have to be paid on an ongoing basis after you take possession of your new home.
Recurring Closing Costs
These are the costs that you may have to pay out at closing, but that you’ll also be responsible for on an ongoing basis as a home owner.
- Property Tax – This will be paid at closing if the seller has pre-paid any of the property taxes for the period after you take possession of the home. If your mortgage lender requires that you put your property taxes in escrow, one or two month’s payments may also be required at closing.
- Mortgage Insurance – If you’ve taken out a high ratio mortgage (with less than 20% down) you may be required to have it insured. You may need to pay the full premium upfront or just the taxes. The same applies if you choose to take creditor protection to help you with your mortgage in case of illness or death.
- Home Owner’s Insurance – To protect you against fire or flood, at the time of closing you will be required to prove that you have insurance in place. Some lenders will require that you pre-pay premiums for the whole year.
If you have any questions about recurring closing costs or any other mortgage related questions, we can help! Please contact us for a free mortgage consultation.