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mbrowne
12 January 2025
Closing Costs for Buying and Selling your Home in 2022
- mbrowne
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
Closing Costs before the “Closing Period”
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.
Appraisal and Home Inspection
Appraisal: $300 - $450 + GST
Appraisals are generally (but not always) needed by the lender to confirm the value of the property.
Home Inspection: $300 - $600 + GST
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.
Deposit
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.
Closing Costs during the "Closing Period"
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.
Legal Fees: $800 - $1,500 + GST
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/
Title Insurance: $250 - $400 + GST
Home and Fire Insurance: ** This cost varies widely depending on location and property**
Taxes Due at Close
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.
Property Transfer Tax
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.
- 1% on the first $200,000
- 2% on the portion between $200,000 and $2,000000
- 3% on the portion between $2,000,000 and $3,000,000
- 5% on the portion above $3,000,000 (this is only applicable to residential portions)
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
Foreign Ownership 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:
- Capital Regional District
- Fraser Valley Regional District
- Metro Vancouver Regional District
- Regional District of Central Okanagan
- Regional District of Nanaimo
GST (Government Sales Tax)
Any time a consumable product is sold there is applicable GST. This is no different when buying a new home.
- In General, GST is charged only on newly built homes. More often than not this is a cost that new owners are unaware of but makes a big difference in cost.
- As of March 28, 2021, the tax rate is 5% of the purchase price in BC.
- When getting a mortgage the “Loan-to-value”, i.e. amount of mortgage you can get, is based off of the contract price plus the GST minus any GST rebate you may get
- Note: GST will also be applicable for most services such as appraisals, home inspections, notary / lawyers, etc.
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.
Property Tax Adjustment
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.
Mortgage Insurance Premium
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.
Adjustment for Ownership Costs
There are several costs to ownership that, in some cases, the purchases may have to pay. These include:
- Utilities
- Condo Fees
- Rental Income
- Security Deposit
Mortgage Broker or Lender Commission (If Applicable)
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:
- Alternative A-Lending
- B-Lending
- Private Lending
- Commercial Lending
Closing Costs after you get your new home
Move in expenses
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.
Renovations and repairs
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.
Who do you know buying a home soon?
Share this to make sure they know all of their closing costs.
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mbrowne
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