It is important to budget carefully for your closing costs as these can quickly add up. Be prepared for the following costs:
Property Transfer Tax
The British Columbia Provincial Government requires that Property Transfer Tax be paid before any property may be transferred to a new owner. The rate is 1% on the first $200,000 and 2% on any value over $200,000. Some buyers may qualify for an exemption. To find out if you are core contact the Property Transfer Tax office at (250)387-0604.
Goods and Services Tax
If you are purchasing a newly constructed home you may be subject to 5% GST on the purchase price. If the home is under $350,000 a rebate will reduce the GST rate to 4.48%. If the home is over $350,000, the rate increases gradually until at $450,000 it is a full 5%.
If the current owners have already paid the taxes for the year, a tax adjustment will be calculated and you will need to reimburse them for your share of the year. This is calculated by the law office who does your conveyancing.
If the lending institution requires an appraisal of the property it may be your responsibility to pay for it - this is usually around $400.
The lending may require a survey certificate that establishes the boundaries of the property. The current owner may be able to provide you with a survey certificate which will save on costs.
Mortgage Application Fee
Lending institutions may require you to pay a mortgage application fee and this will vary among institutions.
Mortgage Default Insurance
You will be required to have mortgage default insurance on any mortgage loan that is in excess of 75% of the appraised value. The insurance premium protects the lender if you are to default on your required mortgage payments. The premium is paid directly to the lender and ranges from .5% to 3.75% of the loan value. The lending institution will often add this to the face value of your loan so this is usually not an upfront cost.
Life and Disability Mortgage Insurance
This is an option available to you. You can purchase insurance which will ensure that your outstanding mortgage balance is paid off if you die or become disabled. This is offered by the lender and will usually be a small monthly payment that will come out of your account the same day as your mortgage payment.
Fire & Liability Insurance
The lending institution will insist that you have coverage. The policy must also guarantee that the lender will receive the balance owing on the mortgage loan before any proceeds are paid out to you.
The transfer of property ownership form the seller to the buyer must be recorded in the Land Title Office in order to protect your interests as the new owner. This will need to be done either through a lawyer or a notary.
Other Costs to Consider
• home inspection fees
• moving expenses
• deposits required by various utility companies.