Real Estate 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 3% of a home’s purchase price.

Mortgage insurance

If your downpayment is less than 20 percent 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 0.6% to 3.85% of the total value of your mortgage. While it’s possible to pay for your mortgage insurance upfront 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.

Appraisal fees

Some lenders may require an appraisal of the property you intend to buy. They want to know the 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 residential property appraisal will cost you $400-$600 plus GST.

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 $1200 – $2000 depending on the property and details required.

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 $500-$1000 plus GST, depending on the size, age and complexity of the home. It will take between 2-4 hours.

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 of purchasing the home.

Taxes

For new homes or those that have undergone significant renovations, a Goods and Services Tax (GST) of 5% applies to the purchase price. Buyers can qualify for a GST rebate of up to 36% if the home’s purchase price is under $350,000. For homes valued between $350,000 and $450,000, the rebate amount gradually decreases. However, homes priced over $450,000 are not eligible for this rebate. Remember, it’s necessary to apply to receive the GST rebate.

Additionally, GST is applicable to various services involved in the home-buying process, such as appraisal, inspection, legal advice, notarization, and real estate services.

Provincial Sales Tax (PST) is generally not applicable to these services, with the exception of legal and notary services where PST may apply.

Property Transfer Tax

In BC, the property transfer tax (PTT) is structured as follows: 1% on the first $200,000 of the purchase price, 2% up to $2 million, 3% on amounts between $2 million and $3 million, and 5% on any portion above $3 million.

First-time homebuyers might not have to pay the PTT for homes under $500,000. For homes priced between $500,000 and $525,000, the exemption gradually reduces and completely phases out above $525,000. Additionally, exemptions are available for first-time buyers of new homes priced under $750,000. The exemption goes down between $750,000 and $800,000, after which there’s no exemption.

Eligibility for the exemption requires you to:

  • Be a Canadian citizen or permanent resident.
  • Have lived in BC for the 12 months preceding your purchase.
  • Have never owned property anywhere before.
  • Have not previously claimed 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

Once you’ve purchased the property, you have to occupy the property as your principal residence for the remainder of the first year

Adjustments

Adjustments involve costs like property taxes and utilities that the previous owner may have prepaid. As the new owner, you’ll assume these expenses, reimbursing the seller for any prepaid amounts. Additionally, if there are any unpaid expenses, the seller will reimburse you for these.

HOME Insurance

As a new homeowner, securing insurance is a crucial step. Lenders typically require you to have home, fire, and liability insurance in place. For those purchasing a strata condo or townhouse, you’ll also need individual unit insurance, complementing the strata corporation’s coverage for the entire building.

Ensure your insurance coverage starts on the sale’s completion date.

Consider exploring mortgage life insurance as well. Although it’s optional, this insurance provides peace of mind by covering your mortgage balance in the event of death or disability.

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.

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.

On a purchase with a mortgage, the cost of a notary/lawyer is typically in the $1000-2000
range.

Utility hook up

There may be fees to hook up hydro, gas, cable and phone.



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 good news is those commissions are typically taken from the proceeds of the sale and paid by the Seller 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.

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