Purchasing a home is an exciting milestone, but it’s essential to be aware of the additional costs that come with closing the transaction. In British Columbia, closing costs can add up to a significant amount, so budgeting for them is crucial. Here's a breakdown of the common closing costs you should expect when buying a home in BC.
1. Property Transfer Tax (PTT)
The Property Transfer Tax is one of the largest closing costs for BC homebuyers. It is calculated as follows:
- 1% on the first $200,000 of the purchase price
- 2% on the portion between $200,000 and $2,000,000
- 3% on the portion above $2,000,000
- An additional 2% on the portion above $3,000,000 for residential properties.
First-Time Home Buyer Exemption: If you’re a first-time buyer purchasing a home at $835,000 or less, you may qualify for an exemption. Partial exemptions are available for homes priced between $835,000 and $860,000.
2. Mortgage Default Insurance
If your down payment is less than 20% of the purchase price, you’ll need to pay for mortgage default insurance. While the premium is added to your mortgage balance, the PST on the premium must be paid upfront at closing. In BC, the PST rate is 8%.
3. Legal and Notary Fees
Legal services are required to transfer the title of the property and handle other legal documents. Fees typically range from $800 to $1,500, depending on the complexity of the transaction.
4. Home Inspection Fees
A professional home inspection is highly recommended before finalizing a purchase. This ensures there are no hidden issues with the property. Inspection fees range from $400 to $800, depending on the size and type of property.
5. Appraisal Fees
Lenders often require an appraisal to confirm the property’s value before approving your mortgage. Appraisal fees typically cost $300 to $500.
6. GST on New Homes
If you’re purchasing a newly built home, GST (Goods and Services Tax) at 5% of the purchase price applies. However, partial rebates may be available for homes priced under $450,000.
7. Title Insurance
Title insurance protects you against potential title-related issues, such as fraud or errors in public records. This one-time cost ranges from $200 to $400.
8. Strata Fees and Adjustments
For strata properties, you may need to reimburse the seller for prepaid strata fees or property taxes. These adjustments are calculated based on the closing date.
9. Moving Costs
Don’t forget to budget for moving expenses, which can range from a few hundred to several thousand dollars, depending on the distance and complexity of the move.
10. Miscellaneous Costs
Additional costs may include:
- Utility hookups or adjustments
- Property surveys (if required)
- Maintenance and repairs for the new property
Final Thoughts
Closing costs typically range from 1.5% to 4% of the purchase price, excluding the down payment. Understanding these expenses in advance will help you plan your budget more effectively and avoid surprises.
If you have any questions about closing costs or need help navigating the home buying process in British Columbia, feel free to reach out. We’re here to provide clear, simple, and strategic mortgage guidance every step of the way.