When buying and selling a home, there are several small closing costs that are often overlooked. What I’ve found helpful is having a good list of costs ready for my clients to make sure to minimize surprises.
Categories of costs that you might be surprised about:
Costs before the closing day
Costs during the close
Costs after you get your new home
This is the time between the accepted offer and the subject removal date if you have one.
During this period your mortgage broker or mortgage agent will work on getting a conditional commitment from the lender. The conditional commitment letter or conditional approval letter is the letter provided by the lender after they’ve reviewed the main documents you’ve provided.
Appraisals are generally (but not always) needed by the lender to confirm the value of the property.
The home inspection is almost always a good idea. It is for you, the buyer, to confirm that there are no major issues that could come up during ownership.
Since the purchase of your home is very important and usually the largest purchase someone will make in their life, we strongly advise having a home inspection done.
When putting in an offer, you will need to make a deposit. The deposit makes up a portion of your down payment. The terms of the deposit are determined by your contract structure and should be discussed with your realtor. Usually the deposit would be due 24 hours after you remove the subject clauses on the contract of purchase and sale.
In some cases, your deposit may be locked up in the equity of your current property or not available. If that is the case, please reach out and we can talk about deposit loans and other temporary solutions.
To make it clear, let’s define this as the time between your subject to finance removal date (if you have one) and the closing date of your purchase.
The cost of legal fees depends largely on who you hire for your conveyance and if they provide any extra services.
If you need a good lawyer, I strongly suggest using Kieren Morris. Kieren and his firm provide top quality service. You can reach his team here: https://morris-law.ca/
Taxes are always an important topic any time money exchanges hands. To keep it simple, I’ve added some of the most common taxes paid during a real estate transaction in British Columbia.
For more details it is strongly recommended talking to a tax accountant as I am not a licensed and registered tax consultant. The information presented below is from the BC and Canada websites.
If there is a transfer of ownership the provincial government charges a Property Transfer Tax. In some provinces, this is called a Land Transfer Tax.
Each province has their own calculation and some don’t charge this tax at all.
In BC, there are some exceptions to the tax including pre-builds and first-time home buyers. (See here for more exceptions).
The property transfer taxes are determined using a sliding scale formula.
Example:
Sarah is looking to purchase a property valued at $560,000. She is not a first time home buyer and can’t claim an exception.
Her calculations look like this:
$2,000 1% x $200,000
$7,200 2% x $360,000
$9,200 Total Property Transfer Tax
BC and more specifically Vancouver have had issues with foreign ownership and money laundering for decades. The government’s attempt to reduce the problem was to implement a foreign buyer’s tax.
Here are the details about foreign buyer’s tax directly from the BC Government’s website:
If the property transfer is within the following areas, the tax rate is 20% on the fair market value of your proportionate share:
Any time a consumable product is sold there is applicable GST. This is no different when buying a new home.
Example:
Anne is buying a new pre-construction home for her to live in. She would like to get an insured mortgage with as little down payment as possible. On the contract, it is stated that the purchase price is $300,000 not including GST.
Gross GST = $15,000
GST Rebate = $5,400
Net GST Due = $9,600
In this case the actual purchase price of the property is $309,600.
The lowest down payment possible is with 5%, which is calculated based off of this final number. Anne must come up with $15,480 for the down payment.
Since this is a point commonly missed by buyers, I find it helpful to keep a good GST calculator handy. Here is a good one by Rosborough.
Since it is unlikely your purchase will close on the same day that property taxes are due, you will need to pay or receive some property tax on the new property.
If you are purchasing a home with less than 20% down payment it will require lender insurance. This insurance is from one of three companies (CMHC, Genworth, Sagen).
With this type of insurance the premium is paid up front. It can either be paid in cash or added onto your mortgage. Usually the latter is the most common option.
There are several costs to ownership that, in some cases, the purchases may have to pay. These include:
In some cases, your mortgage broker or the lender may have to charge a fee. This often is the case when your situation requires an alternative lending solution such as:
These costs vary depending on your personal needs.
They could include, moving fees for a Uhaul or other company, new furniture and appliances, pizza and beer for your friends to help you move, and others.
More often than not, there are some repairs or maintenance needed on your new home.
It might be as little as just getting some painting done.
If there’s anything that needs to be done ASAP make sure you add it into your budget.
Learn about Land Transfer Taxes and Title Fees in Canada, essential closing costs that vary by province. Find out how they’re calculated, typical costs, and tips for budgeting effectively.
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