Knowing Your Closing Cost

Knowing Your Closing Cost

Purchasing a home goes beyond saving a down payment. And it is always a good measure to save approximately 1.5-4% of your ideal home’s purchase price for closing costs. For a $450,000 home, this ranges from $6,750 to $18,000 – but of course, these are estimates as they could differ based on where you live, the type of property you’re buying, and whether it’s a new construction.

Are you ready to purchase? Let’s talk about closing costs!

Appraisal Cost

While this is often covered by the lender, most require you to pay this fee up front to be reimbursed when your mortgage is fully funded. An appraisal is often ordered by the bank or mortgage broker, and it confirms the market value of the property via professional opinion.

Cost: ~$350

Land Survey / Certificate of Location

A land survey outlines property boundaries and identify setbacks, buildings, and other restrictions that can impact a property's value. If the seller is unable to provide an up-to-date survey or certificate of location, you may have to pay for one before finalizing your mortgage. Sometimes, title insurance may be accepted in lieu of a survey.

Title Insurance

In the event of property ownership dispute, title insurance protects you from losses. Title insurance policies protect you and the lender from title fraud, municipal work orders, zoning violation and other property defects.

The cost of a title insurance is generally added to the legal bill by the lawyer.

Legal Cost

This is a fee to the lawyer for the preparation of your commitment such as conducting title search, drafting title deed and preparing the mortgage for disbursements.

Cost: ~$500 + GST/HST, payable upon closing

Land Transfer Tax

The land transfer tax is based on the market value of the property (land + improvements) at the date of registration with the Land Title Office.

Exceptions are made for:

  1. Pre-Sold Strata Units - Owners pay the property transfer tax based on the total amount paid to acquire the property.

  2. First-Time Home Buyers - If you qualify, you may be eligible for either full or partial refund of the property transfer tax.

Tax rates: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax

Are you a first-time home buyer? Check if you qualify here: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers

PST for CMHC Insurance

Although the CMHC insurance is financed into the mortgage, the PST portion must be paid in cash at the time of closing.

The cost of CMHC insurance is dependent on your mortgage amount.

Fire / Property Insurance

At the minimum, you must insure your home against fire or significant damage for at least its replacement cost. While the cost may be billed monthly or annually, the insurance policy must be in effect on Closing Day.

Other Fees

Estoppel Fee

An estoppel certificate is mandatory if you're buying a condominium or strata unit. The certificate is accompanied by the financial statements of the condo corporation and will outline the common fees for your unit and the status of the seller's payments, the reserve fund, etc. Your lawyer/notary requires this document to proceed with the closing transaction of the purchase and will identify any shortcomings after they have reviewed the financial statements.

Cost: ~$100

House Inspection Fee

Depending on the property, you may want to subject the offer based on a positive house inspection to make sure that the house is in the condition the seller deems it is in.

The cost differs dependent on the size of your home.

Water Inspection Fee

If your home has a well, you may want to inspect the water for its potability and supply.

Septic Tank Inspection Fee

If your home has a septic tank, you may also want to inspect it to ensure it's in good working order.

Prepaid Bills

Utility bills and property taxes may have been prepaid by the seller. If that is the case, you may have to reimburse the seller.

And, you're ready to move in - of course, don't forget to factor in your moving costs!

Are you ready to do some house shopping?

References:

https://www.bmo.com/main/personal/mortgages/closing-costs/

https://www.cibc.com/en/personal-banking/mortgages/resource-centre/add-costs-when-buying-home.html

https://www.ratehub.ca/closing-costs-overview

https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers

https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax

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