Closing Costs – The Biggest Purchase Of Your Life Comes With Additional Fees

Your down payment and mortgage costs are not the only costs you will face when buying your home. There are several administrative and legal costs associated with the buying a home, known as “closing costs”. Typical closing costs that are borne by the buyer and vary from 1% – 4% of the home’s purchase price.

Below are common closing costs that you as a buyer of a home may face:

Legal fees

A real estate lawyer will handle all the paperwork associated with the purchase of your home. Typical lawyer fees range from $700 – $2,000 depending on the circumstances and size of your purchase.

The lawyer will be responsible for, amongst other things:

• Reviewing documents such as the purchase contract
• Doing a title search
• Calculating the property transfer tax
• Ensuring that the property taxes are paid
• Dealing with the seller’s lawyer with regards to documentation required
• Dealing with the mortgage documents and funding issues with the banks and the seller

Property transfer tax (or Land transfer tax)

This is a payment that is due when there is a change in the title. The amount of tax to pay will depend on the price of the home and whether you qualify for a tax rebate. In BC, it is calculated at a rate of 1% on the first $200,000 of a property’s price, 2% on the fair market value between $200,000 and $2,000,000 and 3% on the portion greater than 3%. There are exemptions available if you qualify.

Title insurance

This offers protection if you end up in a property ownership dispute once you have purchased your home. This can cost around $300 and is required by the lender, to be paid to the lawyer at closing.

Home inspection fee

Getting a home inspection before buying a property is highly recommended and a standard practice. Costs vary between $300-$500, and is money well spent as any apparent faults and problems are normally discovered in this inspection.

Appraisal fee

In a conventional mortgage where the minimum down payment of 20% is mandated, an appraisal fee is required by the lender to ensure that the market value of the home is accurate. Appraisal fees range from $200 – $500. 

Property taxes

Normally, property taxes are not part of closing costs, but if the seller has paid property taxes for the full year, and if you purchase the home in October, for instance, you may have to reimburse the seller for the portion of the year they will not own. This must be paid at closing.

Provincial sales tax on the CMHC premium

If you are paying less than the minimum required 20% down payment, your mortgage will have to be insured by Canada Mortgage Housing Corporation (CMHC). While the insurance is usually included in the mortgage amount, a buyer has to pay the Provincial sales tax on the CMHC premium prior to closing.

Home insurance

Although home insurance is not classified as a closing cost, some lenders require a policy to be in place before you take possession of the property. Depending on a number of factors, this can range from $250 – $500 or more per month.

GST on new home purchase

In BC, new home buyers do not have to pay the Property transfer tax but pay 5% GST on the purchase price.

Thinking about buying? Assessing risks and breaking down ownership costs are among the many things to consider when buying a home. Our full-service team of appraisal, finance, accounting, legal and mortgage professionals provide you with outstanding service and guidance as you consider your adventure ahead. Speak to an advisor.