What other costs are involved beyond the price of the home?
Buying or selling a home is a milestone moment in anyone’s life. It’s also likely the largest financial transaction most people will ever be a part of. Given this, it’s important to go into this process knowing all of the costs beyond the price of the property.
Here’s an overview of what you might encounter:
Mortgage costs
• Appraisal, if applicable
• Land title registration fee
• Mortgage loan insurance and application fee. If you get a high-ratio mortgage (where you pay less than a 20 per cent down payment) you will have to buy mortgage loan insurance from CMHC or a private company. For fee descriptions, please go to: www.cmhc-schl.gc.ca
Appraisal fees
Before your lender approves your mortgage, you may be required to have the property appraised. Sometimes your lender will cover this cost. If not, you’re responsible. The fee ranges from $300 to $450 depending on the reason the lender has requested the appraisal.
Land survey fee and title insurance
Many lenders require title insurance. This can typically cost around $500. Especially if no title insurance is put in to place, lenders may require a survey of the property. If the seller does not provide the document, you will have to pay to have one done. The fee typically ranges between $300 and $450 depending on the legal fees associated with your lawyer.
Home inspection fee
The fee typically ranges between $400 and $900 for attached properties and may be more for single family houses. The size and level of complexity of the inspection effects this cost. Some inspectors may have surcharges for a crawlspace, basement suite, age of house, mileage, etc.
Goods and Services Tax (GST)
The GST on a new home is five per cent of the price. A GST rebate equivalent to 36 per cent of the GST paid is available for new homes priced up to $350,000 and a partial rebate on new homes priced up to $450,000.
Buyers also pay the GST on fees for services from appraisers, surveyors, home inspectors, lawyers, Realtors, and notaries public.
Provincial Sales Tax
The PST is generally not payable on services except for legal and notary fees. Both the GST and PST are paid on legal and notary fees.
Property Transfer Tax
Home buyers in BC pay a Property Transfer Tax (PTT) when they buy a home. The tax is charged at a rate of one per cent on the first $200,000 of the purchase price and two per cent on the remainder up to $2 million. The PTT is three per cent on amounts over $3 million.
Qualifying first-time home buyers of resale homes may be exempt from paying the PTT if the purchase price of their home is priced up to $475,000. There is a proportional exemption for homes priced between $475,000 and $500,000. At $500,000 and above the rebate is nil.
Qualifying buyers of new homes may be exempt from paying the PTT if the purchase price of their home is priced up to $750,000. There is a proportional exemption for homes priced between $750,000 and $800,000. At $800,000 and above there’s no rebate.
Property taxes
Depending on the Contract of Purchase and Sale, a property buyer will likely be required to reimburse the seller for any prepaid property taxes. The lender may require the buyer to add property tax installments to monthly mortgage payments.
Utility bills
A buyer is typically required to reimburse the seller for any prepayments for municipal sewer and water fees.
Rent and security deposits
If there is a secondary suite or a laneway home rental, and the tenancy continues, the buyer receives the security deposit from the seller with accrued interest because the buyer is responsible for reimbursement when the tenant leaves.
Mortgage life insurance
If the owner dies, this type of insurance pays the balance owing on the mortgage.
Fire and liability insurance
Most lenders require property buyers to carry fire, extended coverage insurance and liability insurance.
Home insurance
Lenders typically require home buyers with a mortgage to buy home insurance. The insurance should be effective on the earlier of either the completion date or the date that the balance of funds is placed in trust. Policies vary. A comprehensive policy typically covers your home’s structure and contents but may not cover perils such as earthquakes or floods, or the replacement of all of your belongings. For this, you will need extended coverage.
Legal or notary fees
Buyers typically hire a lawyer or notary public to draft documents and ensures the title of the home is properly transferred. Likely fees include:
• a title search for a property. This costs between $8 and $11 depending on the method that you search; and
• a land title registration fee, which is approximately $75.
To better understand the land title in the province, visit The Land Title and Survey Authority of British Columbia (LTSA) website at www.ltsa.ca.
Moving fees
Moving fees vary depending on the distance moved and whether professional movers do the packing.
Utility hook ups
There are fees for hydro, gas, cable and phone connections. There are also fees for water and sewer.
Locks
New owners should have door locks rekeyed. Costs depend of whether the locks are standard or electronic.
Strata maintenance fees
Typically paid on the first day of each month. If you have questions about closing costs, please contact your Realtor.
Commission fees
What does it cost to hire a Realtor you may also ask?’ There is no set commission rate in the real estate profession. Most Realtors are paid after ownership is transferred. Fees are typically paid to the real estate company by the lawyer or notary in the transaction, from the sale proceeds.
Compensation is always agreed to beforehand between you and your Realtor. There is no such thing as an average commission. The Commission paid depends on the services provided by your Realtor, which can vary significantly depending on your needs as a client or the business model employed by the Realtor.
When does a commission become payable?
The standard Multiple Listing Contract provides that commission is payable on the earlier of the following: completion date under the Contract of Purchase and Sale, or the actual date that the sale completes.