Closing costs are a one-time fee associated with the sale of a home and are separate from the mortgage insurance and down payment. Typically, these costs range from 1.5-4% of the purchase price, depending on your location. Factoring these costs into your maximum budget can help you narrow down an entirely affordable home and ensure future financial stability and security.
Here are a few closing costs to keep an eye out for:
- Property Transfer Tax: Property transfer tax in BC is a provincial tax levied whenever a real estate property changes hands. The rate structure is progressive, which means it scales up with the property market value
- 1% of the fair market value up to and including $200,000
- 2% of the fair market value greater than $200,000 and up to and including $2,000,000
- 3% of the fair market value greater than $2,000,000
- 5% of the fair market value greater than $3,000,000
- Legal Fees and Disbursements: You can expect to incur a minimum of $500 (plus GST/HST) on legal fees for the preparation and recording of official documents.
- Title Insurance: Most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and is typically $300 or more.
- PST on CMHC Insurance: Though CMHC insurance itself is financed through the mortgage, PST on the insurance is typically paid at the lawyers and sometimes deducted from your advance.
- Home Inspection Fee: A home inspection is highly recommended as a condition of your Offer to Purchase to prevent any future surprises. This can cost around $500.
- Appraisal Fee: An appraisal is performed to certify the lender of the resale value of the home in the case you default on the mortgage. The cost is usually $400 - $600 but is typically covered by the lender.
- Property Insurance: Property insurance covers the cost of replacing your home and its contents, and must be in place on closing day. This is paid in monthly or annual premiums.
- Prepaid Utility Bills: You may need to reimburse the previous owner of your property for prepaid costs such as property taxes, utilities, and so forth.
- Property Taxes: Property taxes are due on an annual basis and are calculated as a percentage of the home value and vary by municipality. You also may need to reimburse the previous property owner if he/she has already paid property taxes for the full year.
