Closing Costs

Closing costs are the fees, charges and disbursements you’ll be paying above and beyond the purchase price of your new home. They are typically paid on the day your purchase closes.

To cover closing costs, you should budget between 1.5% to 4% of a home’s selling price.

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Mortgage insurance

If your downpayment is less than 20 per cent of your total mortgage, you will need to get mortgage insurance. This insurance doesn’t really do anything for you; it protects your lender if you default on repaying your loan.

Mortgage insurance premiums are calculated based on the loan-to-value ratio of your mortgage and range from .6% to 3.85% of the total value of your mortgage. While it’s possible to pay for your mortgage insurance up front in a lump sum, usually the premiums are rolled into your regular mortgage payment.

Most mortgage insurance policies in Canada are provided by the Canada Mortgage and Housing Corporation, a Crown corporation. But there are private providers like Genworth Financial.

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Appraisal fees

Some lenders may require an appraisal of the property you intend to buy. They want to know an approximate value of the property in the current market before they loan you the money to purchase it. If the appraised value of the home you want to buy turns out to be significantly less than the price you’re paying, the lender may not give you a mortgage for the full amount.

Of course, you’ll be paying for their peace of mind; a property appraisal will probably cost you $300-$450 plus GST.

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Land survey fees

Before finalizing your mortgage, some lenders may require a current land survey of the property you’re buying. Again, this is to protect their investment by specifying exactly what it is you’re buying.

A survey will typically cost around $500, but could run $700 – $2000 depending on the property and details required.

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Home inspection fees

Getting a home inspection will bring you peace of mind before signing on the dotted line. A certified home inspector will prepare a thorough report on the condition of the home you intend to buy, including its structural integrity and whether it has any electrical, plumbing, roofing, insulation or moisture problems.

The average home inspection will cost $400-$800 plus GST, depending on the size, age and complexity of the home. It will take between 2-4 hours.

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Water quality inspection

If you’re buying a rural property, or a home that is connected to a well, you may be required to get the quality of the water tested to ensure it’s safe. A water potability test will cost $200-$300. Tests for specific chemicals will cost more.

Sometimes it’s possible to get the seller to cover the cost of water quality tests as a condition to purchasing the home.

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Taxes

The GST on a new home, or one that has been substantially renovated, is 5% of its purchase price. If the home costs less than $350,000, a rebate of up to 36% of the GST is available. The rebate goes down progressively for homes priced between $350,000 and $450,000. Homes priced at more than $450,000 get no GST rebate.

You have to apply for the GST rebate.

Many of the services associated with buying a home are also subject to GST, including appraisers, inspectors, lawyers, Notary Publics and your realtor.

Provincial Sales Tax doesn’t apply to most services except legal and notary fees.

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Property Transfer Tax

When you buy a home in BC, you pay a property transfer tax of 1% on the first $200,000 of the purchase price plus 2% on the rest up to $2 million. If the purchase price of your home is more than $2 million, the PTT is 3%.

BUT if you’re a first-time homebuyer, you may be exempt from paying the PTT if the purchase price of your new home is less than $500,000. The exemption is reduced for homes priced between $500,000 and $525,000; after that, there is no rebate.

To qualify for the exemption you have to

  • be a Canadian citizen or permanent resident
  • lived in BC for the 12 consecutive months prior to your home purchase
  • never owned a property anywhere in the world
  • never previously received a first-time homebuyers’ exemption

The property you’re buying must

  • be in BC
  • be used at your principal residence
  • be .5 hectares or smaller

If you’re buying a newly-constructed home or condo, you may also be exempt from paying the PTT if the home is priced up to $750,000. The exemption goes down between $750,000 and $800,000, after which there’s no exemption. To qualify you must:

  • be a Canadian citizen or permanent resident

The property must

  • be in BC
  • be used as your principal residence
  • be .5 hectares or smaller

Once you’ve purchased the property, you have to

  • move into it within 92 days of when it was registered at the Land Titles office
  • occupy the property as your principal residence for the remainder of the first year

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Adjustments

These are the expenses the current property owner may already have prepaid, like property taxes and utilities. Now that you’re the owner of the property, you’ll be assuming those expenses and reimbursing the seller’s prepaid portion.

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Insurance

Now that you’re a homeowner, you’re going to need insurance. Most lenders require homebuyers to purchase home, fire and liability insurance. If you’re buying a strata condo or townhouse, the strata corporation that administers the building will also require owners to have insurance for their individual unit in addition to the strata’s coverage for the building as a whole.

Insurance should be effective on the completion date of the sale.

Another insurance option that may be considered is mortgage life insurance. While it’s not a requirement, it does help protect a family or estate by paying off the balance of the mortgage should the owner die or become disabled.

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Title insurance

If you’re purchasing a home with a known encroachment to a neighbouring property, unauthorized improvements such as a basement suite, or unpaid strata assessments, you may be required to purchase title insurance. This kind of insurance will also protect you against losses you may incur because of these known issues and even unknown problems like a fraudulent seller.

Title insurance is a one-time expense that will cost you $250 for a policy covering a purchase price under $500,000. The premium goes up by 90 cents for every $1,000 in value after that.

 

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Legal or Notary Public fees

A lawyer or Notary Public helps buyers navigate the legal requirements of buying a home like conducting a title search to ensure the property actually belongs to the person selling it, and registering the sale at the Land Titles office.

As of April 1, 2016, a title search in BC costs $9.45. Registering, or transferring title of a property cost $71.58. Plus you’ll be paying a fee to the lawyer or Notary Public for their time and expertise. That can range from $500 to $1,200.

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Utility hook up

You’re going to pay fees to hook up hydro, gas, cable and phone. Even if none of those utilities were never disconnected, you’ll still have to pay to have their accounts transferred into your name.

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New locks

For peace of mind, and to ensure the former owners don’t crash on your couch after forgetting they’d sold their home to you, get the locks to your new home changed.

 

Strata fees

If you bought a strata condo or townhouse, you’ll be assuming the unit’s monthly strata fees. They’re usually due at the beginning of the month. If your purchase closes in the middle of a month, you’ll reimburse the seller for their unused portion of that month’s strata fee.

Realtors’ commission

Your realtor earns a commission for helping you find and purchase your home. The seller’s realtor also earns a commission for helping sell the home.

The good news is those commissions are typically deducted from the proceeds of the sale. The commissions are usually paid on the completion date.

Moving costs

This one is totally up to you, and the requirements of your move. Hire professionals or recruit friends and family, rent a truck and order a bunch of pizzas.