Closing Costs When Buying a House
Cost to Consider When Buying a Home
Knowing the closing costs when buying a house in advance helps to prevent any surprises at closing (aka completion) and help determine what you can truly afford.
This blog goes through all the closing costs you should be aware of when buying a home, and applies to condos, townhouses, and single family detached homes.
We also go over the full cost of buying a house in BC and also include costs to consider before, upon, and after the closing day.
For help with estimating closing costs for buying a house, you’ve come to the right place! Keep reading below.
During Subject Removal & Before Closing Day
There are some costs that you should account for that are typically performed during the subject removal process before the closing day.
These items are typically a part of your financing, inspection, and insurance clauses to be fulfilled when purchasing.
$300-$450 plus GST, an appraisal is hired by the lender to confirm the value of the home you’re purchasing. An appraisal is not always required by the lender, but is often a requirement for buyer’s that are low-ratio and putting more than 20% down. Keep in mind that your mortgage broker may also cover this cost, so ask if you are responsible for paying it in advance.
$300-$600 plus GST depending on the size of the home, paid to the home inspection company at the time of the inspection – expense borne by the buyer. In some cases, the seller may have had a pre-inspection done. In other cases, you may choose to waive the inspection clause altogether.
This amount varies depending on the type of property that you are purchasing and the coverage you obtain. Lenders typically require home-buyers with a mortgage to buy home insurance. The insurance should be effective on the completion date, and therefore purchased an in effect prior to closing.
On Closing Day
After removing subjects and closer to completion, your lawyer or notary will prepare a statement of adjustments for you so that you can review your debits and credits, and see a final amount of what is owing.
Keep in mind that while these costs are not due until completion, it is common to sign the statement of adjustments and hand in your final costs to close 1-3 business days prior to completion. This helps to ensure that the completion day is smooth and title is transferred on time.
The most common closing costs when buying a house that are due by completion are:
The Balance of the Purchase Price
The purchase price less your initial deposit. Usually, the bulk will come from your lender and become your mortgage.
Property Transfer Tax (PTT)
This is probably one of the biggest closing costs to be aware of. If you do not qualify for an exemption then you will have to pay the property transfer tax on your purchase. This is a one time tax based on the fair market value (in most cases, the purchase price). For most residential properties, the property transfer tax rate is calculated as:
- 1% on the first $200,000
- 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000
- 3% on the portion of the fair market value greater than $2,000,000, and,
- if the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000
The most notable exemptions for property transfer tax are the first time home-buyer PTT exemption and Newly Built Home PTT exemption. For more information on property transfer tax and PTT exemptions, read our blog post here: Property Transfer Tax Information in BC
Typically $1000-$1500, but the amount varies depending on purchase price and lawyer/notary. This is the fee that the lawyer charges for their services to facilitate completion and transfer title of the property from the seller to the buyer. This should also include acts such as ordering a title search and registering title.
CMHC Insurance Premium
This is a mortgage insurance premium that is charged to you if you are a high-ratio mortgage and therefore putting less than 20% down. The amount charged works on a sliding scale, and therefore varies if you are only putting 5% down vs say, 15% down. While you can pay this lump sum at completion, it is also common to blend this amount in your monthly mortgage payment.
Title insurance protects you and the lender from title fraud, municipal work orders, zoning violations, and other title related property defects. While the lender may require you to purchase it at your expense, most of the time you will have the option as to whether or not you want to purchase title insurance.
Adjustments for Prepaid Taxes & Utilities
This amount varies, and whether you obtain a credit or a debit for the property taxes and utilities depends on when you move in and whether the seller has paid already. Your lawyer or notary will calculate and pull the tax and utility information to see if they are up to date and how much is required to transfer title.
For example, property taxes are paid on July 1st for a full calendar year. If your move in date is post July 1, you will likely have to provide a reimbursement to Seller of property taxes they paid beyond the closing date. However, this can also be a credited amount back to the buyer depending on the move-in date and whether or not the seller paid the taxes prior to the due date.
If the homeowner does not have a property survey, then the lender may require that you order a survey certificate of the property, which can range from $500 or more. This is not required on strata properties, and typically only applies to detached houses with lots.
Bridge Financing (if applicable)
Some buyers that are also selling their home may have purchased bridge financing to line up their purchase & sale dates. In the event your home purchase closes before the sale of your current home, then the financing and interest cost to bridge the dates may be required and due payable at completion.
Additional PTT – Foreign Buyer Tax (if applicable)
an additional 20% of the fair market value is charged if your title is transferred to a foreign entity. This applies to foreign buyer purchases in Metro Vancouver, Capital Regional, Fraser Valley, Nanaimo & the Okanagan. The additional property transfer tax doesn’t apply to properties located on Tsawwassen First Nation lands.
5% tax based on the purchase price; generally only applicable on newly built homes (ie presale condos). GST can be added to your mortgage unless you are receiving a rebate, in which you need to pay your portion of the GST in full.
For more information on GST, when you need to pay it, and rebates, read this blog post: GST in Real Estate Info
Condo Fees & Rental/Security Deposit Reimbursements (if applicable)
Reimbursement to Seller for prepaid items such as rental and security deposits, or the strata maintenance fee, etc. (amount varies depending on date of move in)
Form B and/or Strata Documents (if strata)
Usually ordered by the listing agent at the time the property is listed; however, if you have negotiated a longer completion the lender may require an updated certificate to be ordered from the property management company. This cost is typically about $50-100; however, if a rush fee is required it could be more.
Strata Move in Fee (if strata & if applicable)
One time fee that varies from strata to strata, as this is an amount set out in the bylaws for each strata. There have been times where I do not see any move in fee applicable; however I would recommend to estimate about $100-$200 but I’ve seen up to $300.
After Closing Day
Congratulations, you’re officially a homeowner – but there are still costs that I recommend you budget for after closing day.
You’ve got the keys to your new home, but let’s also consider how much it will cost to get you settled in! Here are some other closing costs to consider when buying a home after completion:
- Moving Truck & Box Rental
- New locks
- Household Goods & Furniture
- Utility Connection Charges
- Redecorating and Renovating Costs
- Immediate Repair and Maintenance Costs
- Elevator or move in deposit (if applicable, and often refundable by the strata)
Knowing and understanding the closing costs when buying a house can be an overwhelming process!
There’s a lot to know and keep track of, and you’ll want to make sure you’re within your budget. Closing costs and budget estimations are not something that you want to make mistakes on – so get the proper guidance you need when dealing with financing and cost matters.
Hiring a realtor is a FREE service when purchasing a home, so if you’re wondering how to get started and need help estimating costs then reach out to us today.
If you’re looking to purchase a property and want a realtor to help you get started, we’re here to help. Let’s estimate costs together! Start a conversation by calling 604-765-0376. Prefer text? 604-319-0200 or email [email protected].