Selling Your Condo — The Budget
NEW CONSTRUCTION/FREEHOLDThe question most people ask prospective lawyers is “How much do you charge?” The question you should be asking is “How much money do I need to budget for my transaction?”
Our aim is to provide you with clarity regarding your legal expenses and other costs in the beginning so you can properly budget for your purchase. Moving is stressful enough without finding out on closing that the costs are higher than anticipated.
For budgeting purposes, you need to factor in these four areas:
ONE
LEGAL FEES AND EXPENSES
There is a small variance in legal costs from law firm to law firm and our legal costs are competitive with other law firms. Give us a call at (613) 746-8115 and we will be pleased to provide you with both the total legal costs (fees, all expenses and HST) as well as a breakdown so you can properly budget for your sale.
Our fees are due on closing and paid from the sale proceeds.
TWO
REAL ESTATE COMMISSIONS
On closing, we will pay from the sale proceeds, your real estate agent’s commissions owed for their assistance in selling your home. Keep in mind that there is HST applicable on those commissions; something that people sometimes don’t realize.
THREE
MORTGAGE DISCHARGE PENALTIES AND ADMINISTRATION FEES
On closing, we will pay out the balance owing on your mortgage or secured line of credit. On top of the balance owing, the lender will be charging an administration fee to discharge the debt (usually around $300 or so).
If you are paying out your mortgage prior to maturity, you will likely be subject to an early payout penalty which is often the greater of:
- (a) 3 months’ interest on the outstanding balance; and
- (b) The interest rate differential: For fixed rate mortgages and where the market interest rate is lower than your interest rate, the difference in the interest rate is multiplied by the outstanding balance and the number of years left on the term of the mortgage. This can be a lot more than 3 months’ interest so you should contact your lender to find out the approximate penalty in advance.
FOUR
ADJUSTMENTS AND OTHER EXPENSES
You also need to budget for:
- Municipal Property Taxes: You share the year’s tax assessment with the buyers pro-rata. On closing, you will have already paid the municipality either more or less than your share of the year’s taxes. The difference is the adjustment and it is paid on closing.
- Condominium Fees: Like with property taxes, the current month’s condo fees are shared pro-rata with the buyers. You pay the current month’s condo fees and the buyers pay their share of the month to the you as an adjustment on closing.
TIP
You may be able to reduce the amount of the penalty by making a prepayment prior to closing to reduce the outstanding principal on which the penalty is based. Please review the terms of your mortgage to determine what your prepayment privileges are and feel free to contact us if you wish to discuss this in further detail. Give us a call and we will be happy to discuss your eligibility in more detail.
613 746-8115