RESIDENTIAL CLOSING COSTS FOR HOMEBUYERS
When property is purchased in Canada, there are other costs related to the transaction in addition to the purchase price. Not all costs will apply and varies on the circumstances, but are listed here for information and to help you plan for these costs. Our team in addition to your mortgage broker and your legal advisor can help you figure out which apply to your situation.
BC PROPERTY TRANSFER TAX | This is a provincial tax charged every time a property changes hands. The cost is calculated as follows:
Buyers can save up to $13,000 from BC's property transfer tax if they purchase a newly built home, condo or hownhouse valued under $750,000. If you are a first time home buyer, there is a program to provide full or partial relief from this tax on properties up to $475,000 under specific conditions. We can help you find out if you qualify. More information can be read here: BC Property Transfer Tax
FOREIGN BUYER'S TAX OF 15% | As of August 2016, the BC Provincial Government annouced an additional Property Transfer Tax to be applied to all foreign nationals purchasing Residential Property in certain cities. More details on who qualifies as a foreign national and how this applies to your consideration of a purchase of property in British Columbia can be found here: BC Foreign Tax
GST | If you are buying a newly subdivided lot or a new home, GST will generally be charged at 5% on the full amount of the purchase. If you are building the home, the situation varies as some contractors include the GST, and others may refund partial GST to themselves or to the purchaser, so it is important to find out at the time you make your offer.
APPRAISAL | Most lenders will require an appraisal of the property to support the lending value of the property. Fees are higher for revenue properties or more complex purchases. Commercial appraisals are significantly more expensive and more time consuming to prepare given the complexity of the appraisal required.
HOUSE INSPECTION | An inspection is a thorough evaluation of the structure, systems and components of a home. The inspection report is usually multi-paged, and comments on the condition of, but not limited to: foundations, electrical, plumbing, heating, water heaters, appliances, fireplaces, drainage, roof, walls, floors, attic, crawl spaces, patios, etc. The inspection is usually performed a day or two before the market value is determined by the property appraisal. An inspection can cost anywhere between $300-$500 but the cost is well worth identifying any major cost repairs required.
TITLE INSURANCE | To protect the lender's interest in the mortgaged property in the event there is some discrepancy on title that would create a legal problem, many lenders require title insurance. Title insurance is often a less expensive and acceptable alternative to getting a survey prepared for the property.
SURVEY | Lenders may require a survey to support the transaction. A survey is a drawing by a certified surveyor of the property lines and where the building sits on the property. This is done so that the lender can verify exactly what and where they are lending on, and to provide some assurances that the buildings are not illegally encroaching on neighbouring properties, etc. The cost of the survey varies for size/complexity of the property but standard neighbourhood lots have a survey cost of about $270.
MORTGAGE INSURANCE | The term Mortgage Insurance is used in two different ways, and each have different and specific purposes:
1) Life/Disability Insurance: This insurance is often recommended by lenders to ensure that you are able to meet the mortgage payments should you or your co-borrower become disabled or die during the term of your mortgage. Rates and Coverage vary widely, so let us help you make sure you are getting the most coverage for your money.
2) Default Insurance: Default insurance is usually required on loans where the borrower is borrowing more than 75% of the value of the property. Genworth and CMHC provide this insurance and the cost varies with the amount borrowed relative to the property value. There is a $165 application fee for these programs.
REALTOR COMMISSIONS | If you are purchasing and use a Realtor to help you, the seller will pay for their Realtor and yours. If you are selling, fees vary, but are often 6 or 7% on the 1st $100,000 and 3 or 4% thereafter. There are a number of lower commission Realtors, and their fees will vary. GST at 6% of the commission payable is also charged to the seller.
LEGAL FEES | If you are selling a property, you will be responsible for legal fees regarding clearing the title for the purchaser. If you are the purchaser, you are responsible for conveyance fees, preparation of statements of adjustment, and mortgage registration.
Interest Adjustments: This is the interest that you will pay for receiving the mortgage funds for periods outside of standard payment periods. For example, if your completion date was on the 23rd of a 30 day month, you owe 8 days interest for those days before normal payment cycles commence.
PROPERTY TAX ADJUSTMENTS | Generally, property taxes for the calendar year are paid at the beginning of July. If you purchase a property before July 1st, the seller will be paying you for the days they owned the home from January 1st to completion day. You then are responsible for the entire amount to be paid to the municipality on July 1st. If you purchase a property after July 1st, you will pay the seller for the days you own the property from completion day to December 31st, as they will already have paid the entire amount to the municipality on July 1st.
RENTAL DEPOSIT ADJUSTMENTS | If the property has a rental suite the vendor must transfer the tenant’s security deposit to the purchaser. If completion takes place mid-month, adjustments must also be made for rent collected by the vendor and pro-rated payment made to the purchaser.
PROPERTY INSURANCE | If you have a mortgage on a property, almost every lender will want to make certain that you have adequately insured the property for loss from fire, flood etc. Note that the insurance must be for the full property value rather than just the mortgage amount. In the event of a loss, it is standard practice mortgaged property generally notes the financial institution as the payee. There is a fee of about $35 for the insurance company to confirm coverage in this manner and is often referred to as a “binder.”
**This information is being provided to assist in the planning of a home purchase. It is not intended to be legal advice and the information set out may not be applicable in all cases. In some situations, a purchaser may be required to pay for other additional expenses such as a second mortgage, an assignment of rents, power of attorney, or independent legal advice.
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