Ashford W. Meikle, Staff Reporter
SO, YOU see your 'dream' house and you decide that you must have it. You
figure that at $3 million you can 'scrape' together the 15 per cent down payment and then you're home free pun intended. Well, think again. Before you even consider buying a house or even paying down on any property, you must have the closing costs ready and 'set aside.'
Closing costs are the charges involved in executing and
finalising the sale of a property. The charges vary and, they do not refer solely to government taxes.
According to senior mortgage manager at Jamaica National Building Society (JNBS), Wanica Purkiss: "People are not surprised that they have to pay closing costs. What they are surprised about is the amount they have
to pay." She noted that very often, persons are told by their lawyers of only the government charges involved in the purchase of
the property without reference to possible processing fees at
mortgage companies. But JNBS does not charge a processing fee for first-time homebuyers.
Mrs. Purkiss told Sunday Business that at Jamaica National they "are prepared to lend the closing costs [to
borrowers] as long as they can service the mortgage." This is so, especially if the purchaser had paid down a 15 per cent deposit on the property. She said that for first-time owners, JNBS will lend up to 95 per cent of the cost of the property.
PRELIMINARY AND LEGAL FEES
At the outset, after identifying the property, you will have to pay for the following:
Valuation report: The costs vary. While it is mandatory if you are getting a mortgage, it makes sense to get one done even if you are doing a cash purchase. It is for your protection. However, never use a valuator recommended by the seller. If you are getting a mortgage, the mortgage company will usually recommend its list of approved valuators. Valuation costs vary but a leading Kingston appraiser charges $2.50 per $1,000 of the value of the property (for residential purposes, commercial rates are higher). Note, also, that you will be required to pay GCT on the valuation cost. Plus you will be expected to pay for
such charges as the appraiser's travelling costs and title search.
Surveyor's report: This is as equally important as the valuation. In simple terms, the report proves that the property exists. It also contains crucial information about the state of the land. Many buyers have opted out of real estate deals because the surveyor's report indicated that the building may have breached a covenant or that the area where the
property is located is subject to frequent slippages or flooding. A one-page document, the cost of the report varies but you can expect to spend at least $6,000. The mortgage company requires it and the cost is borne solely by the purchaser.
Attorney's fees: What you pay depends on the relationship you have with your atorney. Generally, however, fees range from one to three per cent of the purchase price. Some persons try to cut costs by using the vendor's lawyer. This is not recommended and you do so at your own peril.
Sale Agreement:You will be expected to share the cost with the vendor and it attracts GCT. The vendor's attorney prepares it and this is why it is always important to use your own lawyer. Typically, sale agreements cost anywhere from $20,000 to $30,000.
Lawyer's service charges:You can expect to foot half of the costs related to services provided by the vendor's attorney for preparing the TRI form (which transfers possession on the valuation roll), the possession letter and letters to the utility companies (Jamaica Public Service and the National Water Commission).
Miscellaneous Fees: Expect to pay half of the miscellaneous fees (such as photocopying and bearer or courier services), charged by the vendor's lawyer. These fees are usually quite negligible.
PAID TO GOVERNMENT
Then, there are other costs involved which are paid to the government and these are:
Stamp duty. The stamp duty is five and a half per cent of the fair value of the property. As the purchaser you will be required to foot half of that five and half percent of the fair value of the property. The fair value is the market value of the property. According to a source at the Stamp Office, "It has to be a market value because if it comes in and we suspect otherwise, we are going to bounce it and send out our own valuators. It's what the act says. It's the law."
Transfer fee:One half of the one per cent of the value of the property. The registration fee on the transfer is paid at the Titles Office. As with the stamp duty, you will be required to pay half of this cost. Not to be confused with transfer tax, which is paid by the vendor.
If you are getting a mortgage, there are certain fees which you must pay before the mortgage is disbursed. Again, depending on the mortgage company, the charges will vary - from time to time mortgage companies waive some of these fees for first-time owners.
Commitment fee: This depends on the mortgage company. It can be anywhere from one to three per cent of the mortgage and attracts GCT. JNBS for example, does not charge for a first time owner but a one per cent fee is charged for other loans (such as equity loans or a second mortgage).
Peril Insurance: This is mandatory in most instances. The rate depends on the motgage company.