Closing costs refer to the various expenses incurred by both buyers and sellers during the final stages of completing a property transaction. These costs are in addition to the purchase price of the property and are typically paid at the time of closing. Closing costs can vary depending on factors such as the type of property, its location, and specific transaction details.
Here are some common closing fees faced by home buyers in BC:
Goods and Services Tax (GST)
If you are purchasing a newly constructed home, a 5% federal GST may apply to the purchase price. However, there are rebates available for qualifying buyers. For instance, first-time home buyers may be eligible for the GST New Housing Rebate. Visit my Tax Season Savings blogpost to learn more!
Property Transfer Tax
The Property Transfer Tax (PTT) is a provincial tax paid by the buyer upon the transfer of property ownership. It is one of the largest closing costs for BC homebuyers.
Property Transfer Tax is calculated based on the property’s purchase price:
- 1% on the first $200,000
- 2% on the portion between $200,000 – $2 million
- 3% on the portion over $2 million
- Note: An additional 2% PTT applies to homes valued over $3 million.
First-time homebuyers may qualify for PTT exemption on homes valued up to $835,000, effective April 1, 2024.
Legal Fees
Legal fees are costs associated with hiring a lawyer or notary public to handle the legal aspects of the transaction, including conveyancing (title transfer) and mortgage registration. Lawyer fees are typically between $1,000 – $1,400. The exact cost depends on factors such as the type of home and complexity of the purchase.
Home Insurance
Lenders often require proof of home insurance before finalizing the mortgage. The cost of insurance can vary depending on factors such as the property’s location and value.
It’s advisable to start exploring insurance options around a month prior to the closing date. This allows sufficient time to compare various insurers and ensure you’re getting the most favorable deal.
Mortgage Fees
Depending on the lender and mortgage type, there may be various fees associated with obtaining a mortgage, such as application fees, appraisal fees, and mortgage insurance premiums. Mortgage brokers can outline all financing costs you’ll incur.
Adjustments
Adjustments refer to the prorated costs such as property taxes, utility bills, and strata fees that are adjusted between the buyer and seller based on the closing date. Buyers reimburse the seller for these costs at closing. Expect $3,000-5,000 for common adjustments.
It’s essential to consult with a real estate professional or legal advisor to get a comprehensive understanding of the closing costs specific to your situation and location – In general, expect 2-5% of the purchase price. Additionally, you should budget for these expenses when planning your home purchase to avoid any surprises during the closing process.
