Looking at all the things involved in a home sale can be bitter sweet if you’re the home buyer. This is the kind of bittersweet that goes beyond the emotional and sentimental attachments you have with your old home. Getting a new house always comes with a good feeling, even with people after foreclosure. It’s still a roof above one’s head and a new place to build new memories in. But, the bitterness comes when you’re trying to pay up for it.
As I sit here sipping coffee in my cousin’s condo right in the heart of KLCC, I realise that closing costs are a whole other dimension of bitterness. Those are strong words(blame it on the caffeine). They either take so much a chunk of your budget, or go even beyond your budget that you’d have to raise another amount on top of the money you’d have to raise for your down payment before the house is practically yours.
Ugh, it pains me to even talk about it. Here’s why.
What are Closing Costs?
Closing costs are the miscellaneous fees that come with the closing of a house. Say you’ve paid your down payment, the closing costs cover the other services that basically ‘close’ the deal – working up the title of the house, getting the house in your name, working up the papers on the mortgage loan, etc.
If you’re just about to ask, well, apparently these are inevitable. Not to mention the risk of getting scammed(but if you’ve read this previous article you’d be able to avoid it, for sure.)
The ‘cost’ of the closing cost is a variable percentage of the lump sum of the house. The usual amounts range from 2 to 4% of the total amount of the house. And that is not a small fee to pay.
What are my options regarding Closing Costs?
Well since you can’t avoid having to pay it, you have no other choice but to do so. Your available options would be on how you’re paying it and for how much you can save up on it.
First off, you need to get a Good Faith Estimate (GFE) from your mortgage broker. The GFE is an account of all that needs to be paid in the closing costs. Sometimes, you end up purchasing a house with a very high interest rate – something that the banks loooove. This happens if you go through a broker. In this scenario, the bank will give the broker an incentive called Yield Spread Premium – and you don’t want that on your accounts. The best thing you can do with this is negotiate to have it removed or at least lower it.
You can pay for your closing costs in cash. But that’s too heavy a burden on anyone’s pockets but Beyonce’s. Say you’ve already paid thousands of ringgit on your down payment, your closing costs could range between RM300 to RM500, again depending on how much the house costs in total. If that’s beyond you, you can ask your lender to add the closing costs to the rest of the mortgage money.
More insights coming soon, only here at Real Estate Online Help Encyclopedia.