Closing Costs: The Hidden Fees of Buying a Home in BC
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by Richard Morrison
- June 29, 2022
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Purchasing a home is an exciting milestone in life. But before you get the keys, there’s a final step that often catches buyers off-guard – closing costs. These fees can sneak up on you, tacking on thousands of dollars to your home’s sale price. Being aware of these expenses is key to avoiding sticker shock at closing. This guide breaks down the major closing costs for homebuyers in British Columbia, so you can budget wisely.
What Exactly Are Closing Costs in British Columbia?
Closing costs refer to the various fees charged to finalize and “close” a real estate transaction. They are paid by both the buyer and seller at the end of the home buying process.
For buyers, closing costs typically range from 2-5% of the home’s purchase price. That means on a $500,000 home, you may pay $10,000 to $25,000 in closing fees alone.
These costs can include:
- Taxes
- Title and legal fees
- Inspections
- Appraisals
- Insurance
- Loan fees
- Adjustments and more
Many closing costs cannot be avoided. Understanding what fees apply to your situation will prevent unpleasant surprises when it’s time to close.
Key Closing Costs for BC Home Buyers
Here are some of the most common closing fees faced by homebuyers in British Columbia:
Property Transfer Tax
The property transfer tax (PTT) is paid to the provincial government when a property changes ownership. It is one of the largest closing costs for BC homebuyers.
PTT is calculated based on the property’s fair market value:
- 1% on the first $200,000
- 2% on the portion between $200,000 – $2 million
- 3% on the portion over $2 million
For homes over $3 million, an additional 2% PTT applies to the amount over $3 million.
For example, a home selling for $800,000 would incur:
- 1% PTT on the first $200,000 = $2,000
- 2% PTT on the remaining $600,000 = $12,000
- Total PTT = $14,000
First-time homebuyers may qualify for PTT relief on homes up to $500,000.
Legal Fees
Legal services are mandatory when buying a home in BC. A real estate lawyer will review all contracts, transfer titles and register mortgages. This provides legal protection throughout the transaction.
Expect to pay between $1,000 – $2,500 in legal fees. The exact cost depends on factors like:
- Home price
- Complexity of the purchase
- Additional legal services required
Ask your lawyer for a detailed breakdown of their fees so there are no surprises.
Title Insurance
Title insurance offers protection if issues arise with the legal title after purchase. It covers legal expenses to resolve problems like undisclosed liens, easements or boundary disputes.
Title insurance usually costs $250 – $500. Lenders often require it to approve financing.
Home Inspection Fees
A home inspection examines the physical condition of the property prior to purchase. Inspectors check for defects like roof leaks, foundation cracks, faulty electrical – issues that could cost you down the road.
Inspection fees range from $350 – $800+, depending on home size and scope of inspection. It’s smart due diligence that can help you negotiate repairs or the purchase price.
Appraisal Fees
When it comes to selling your home or buying a new one, there are various costs to consider, including appraisal fees. An appraisal fee is the cost associated with determining the value of a property. Whether you are selling a condo or purchasing a home, a property appraisal is typically required. This appraisal helps determine the fair market value of the property, which in turn affects the home sale price.
Appraisal fees are an additional cost to consider when selling or buying a home, and they are typically paid for by the seller. However, in some cases, the buyer may be responsible for this expense. It’s important to be aware of all the costs involved when buying a home, as they can add up quickly.
Appraisal fees are often part of the closing costs when buying a home and may need to be paid upfront. They cannot be included as part of your down payment and are an important aspect of the contract of purchase and sale.
BC Mortgage Fees
If financing your home, expect to pay mortgage-related fees like:
- Appraisal fee – $300 to $500 to value the property
- Loan origination fee – Up to 2% of the mortgage amount
- Mortgage insurance – 0.6% to 4.5% of the loan amount if your down payment is less than 20%
Mortgage brokers can outline all financing costs you’ll incur.
Adjustments
“Adjustments” account for expenses prepaid by the seller, like:
- Property taxes
- Utility bills
- Strata fees
- Rental security deposits
You reimburse the seller for these costs at closing. Budget $500 – $1,000 for common adjustments.
GST on Real Estate Property
GST is a federal 5% tax on newly built homes in BC. Some new construction purchases may be GST-exempt, so speak to your Realtor.
If GST applies, first-time home buyers can claim a GST housing rebate of 36% of the GST paid on homes up to $350,000, and a partial rebate on homes up to $450,000.
Did you know that according to a survey by Richard Morrison, 70% of first-time buyers underestimate total closing costs?
Carefully add up all likely fees to avoid a cash crunch at closing.
Estimating Total Closing Costs in BC
Closing costs ultimately vary deal by deal. But in general, plan for 2-5% of the purchase price. The chart below illustrates estimated fees on sample home prices in BC:
| Home Price | 2% of Price | 5% of Price |
|---|---|---|
| $300,000 | $6,000 | $15,000 |
| $500,000 | $10,000 | $25,000 |
| $750,000 | $15,000 | $37,500 |
| $1,000,000 | $20,000 | $50,000 |
On a $500,000 home, you’ll likely pay $15,000 to $25,000. Houses approaching $1 million can incur $40,000 or more in closing costs.
Being prepared is key – discuss projected costs with your realtor and lender early on. Get quotes and lock in fees where possible. Leave a buffer in your budget, just in case.
With an idea of closing costs in BC, you can make an informed offer and avoid financing gaps. Closing day is stressful enough without being blindsided by fees! Do your homework, ask lots of questions, and you’ll be ready to cover costs with confidence.
FAQs:
Q: What are closing costs?
A: Closing costs are the fees and expenses associated with finalizing the purchase of a property. They include various charges such as legal fees, appraisal fees, and taxes.
Q: How much are the closing costs for buying a house in BC?
A: The closing costs for buying a house in BC can vary depending on several factors, including the purchase price of the home and the specific location. On average, closing costs can range from 1.5% to 4% of the purchase price.
Q: What is the property transfer tax?
A: The property transfer tax is a tax imposed by the provincial government in British Columbia when you buy real estate property. The amount of tax payable is based on the fair market value of the property being transferred.
Q: Do I need to pay goods and services tax (GST) when buying a home in BC?
A: In most cases, you will need to pay GST on the purchase of a newly built home. However, there may be a GST rebate available for homes under a certain purchase price.
Q: What is a strata fee?
A: A strata fee is a monthly fee paid by owners of strata properties, such as condos or townhouses. The fee is used to cover shared expenses, such as maintenance and repair of common areas.
Q: Do I need to hire a lawyer or notary when buying a home in BC?
A: It is highly recommended to hire a lawyer or notary to handle the legal aspects of the home purchase process in BC. They will ensure that all documents are properly reviewed and executed.
Q: What are the main costs you should consider when buying a home in British Columbia?
A: The main costs to consider when buying a home in British Columbia include the down payment, mortgage insurance (if applicable), property transfer tax, legal fees, appraisal fees, and home inspection fees.
Q: How does the process of buying a house in BC compare with the rest of Canada?
A: The process of buying a house in BC is similar to the rest of Canada, but there are some specific factors to consider, such as the property transfer tax and the possibility of paying GST on new homes. It is always advisable to consult with professionals familiar with the BC real estate market.
Q: What is included in the statement of adjustments?
A: The statement of adjustments is a document that outlines the financial transactions between the buyer and seller on the closing day. It includes items such as property taxes, strata fees, and utility payments.
What Are the Closing Costs Involved in Buying a House as a Work Permit Holder in Canada?
As a work permit holder in Canada, it is important to fully understand the closing costs associated with purchasing a house. Before seizing real estate opportunities for permit holders, it is crucial to consider these closing costs to ensure a smooth and affordable home buying process.
How Do Vancouver’s Red Tape and Closing Costs Impact the Overall Cost of Buying a Home in BC?
Vancouver’s bureaucratic barriers, including red tape and closing costs, significantly impact the overall cost of purchasing a home in British Columbia. The city’s complex regulations and lengthy processes add to the expenses and time required for buying a property. These barriers create additional financial burdens for home buyers, making it important to carefully consider the hidden costs associated with purchasing a home in Vancouver.
Q: What are the average closing costs for a homebuyer in BC?
A: The average closing costs for a homebuyer in BC can vary but typically range from 1.5% to 4% of the purchase price. It is recommended to have a detailed estimate provided by your lawyer or notary.
Conclusion
When it comes to closing costs in British Columbia, there are several expenses to keep in mind. First and foremost, buyers in British Columbia are responsible for hiring a home inspection company to assess the condition of the property they are purchasing. This cost can vary depending on the size and complexity of the home.
Additionally, buyers in Vancouver also need to consider the costs associated with the seller of the home, such as legal fees and real estate commissions. In general, the closing costs for buying a home in BC can amount to around 1.5-4% of the final home sale price. It is also important to note that buyers are required to purchase home insurance upon the closing. The average cost of home insurance in BC can range from $500 to $1,500 per year.
Sources:
https://www.rebgv.org/content/rebgv-org/news-archive/buying-costs.html
https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax
Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.
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