Closing Cost Awareness
Congratulations on reaching the final stages of purchasing your new property! It's important to keep in mind that there are closing costs associated with finalizing the transaction. Being aware of these costs and budgeting for them can help ensure a successful and stress-free closing process.
1. Property Appraisal
A professional appraisal report may be mandatory to verify the accepted offer amount stated in your real estate contract. Your lender may only accept appraisals performed from their own list of approved appraisers. The cost of a property appraisal will vary depending on the complexity and typically starts at around $350.
2. Land Title Certificate
A legal document that shows the exact placement of the existing house on the property, including lot dimensions and boundaries. If the current homeowner doesn't have a copy, you may need to have a land survey performed. The average cost for a Land Title Certificate is approximately $500. You can learn more about it here.
3. House Insurance
It's important to note that lending institutions may have policy requirements for home insurance that can affect the overall cost. In British Columbia, yearly home insurance premiums can vary considerably and typically start at $1,200.
4. Title Insurance
This protects you and the lender from unforeseen costs, related to property - undisclosed liens, fraud, land encroachment and much more. If required your lawyer or notary can assist you. Properties valued under $100,000 will cost around $225 for Title Insurance.
5. Legal Fees
Legal fees are an essential part of any real estate transaction. The amount you pay will depend on the complexity of your purchase and mortgage. Typically, legal fees for a home purchase start at around $1,200 to $1,400.
6. Adjustment Fees
These fees can include property taxes, city utilities, strata fees, manufactured mobile home rental fees, adjustments for an existing tenant, and more. The amount of adjustment fees can vary depending on how much the seller paid in advance for the property.
7. Property Transfer Tax
Keep in mind that the closing cost for this process is typically the biggest expense of buying real estate. Your lawyer or notary will handle the payment when the transfer takes place, and the amount due is based on the fair market value of your new home. If your property is valued at under 3 million, you will pay General Property Transfer Tax.
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1% of property value up to and including $200,000
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2% of property value greater than $200,000 up to and including $2,000,000
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3% of property value greater than $2,000,000
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However, if you are a first-time home buyer, you may qualify for property tax exemption or deductions. The Province of British Columbia provides detailed information on this topic, which you can find here.
7. GST
It's important for homebuyers to understand the tax implications when purchasing a new home. GST is calculated at 5% of the property's fair market value and is applied to new builds or homes that are more than 90% remodelled. It's also worth noting that sometimes the GST is factored into the purchase price of a new home.
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Buyers are required to pay GST in advance and may be eligible for a partial rebate from the Government of Canada. To learn more about the rebate requirements, click here. It's recommended to consult with a lawyer to ensure a smooth payment process.
