When purchasing a home, it's crucial to plan for closing costs in addition to the purchase price. While the down payment is a major focus, there are other important fees that come with closing the deal. Here's a detailed breakdown of these costs, including transaction expenses and other key considerations:Transaction Expenses
1. Property Transfer Tax (PTT)
PTT is a sales tax levied by the British Columbia government on all real estate transactions within the province. The rates are:
• 1% on the first $200,000
• 2% on the portion between $200,000 and $2 million
• 3% on the portion above $2 million
Note: PTT is not applied to the GST portion when applicable.
PTT Exemptions:
• First-Time Home Buyers: If you're purchasing your first home, you are exempt from PTT if the home is priced at $835,000 or less (effective April 1, 2024). Partial exemptions apply to homes between $550,000 and $835,000, but no exemption exists for homes priced above $835,000.
• Co-Purchases: If only one buyer is a first-time homebuyer, the exemption applies only to that person’s portion of the property.
• Residency Requirement: To qualify for the first-time buyer exemption, you must reside in the home for at least one year after purchase.
2. Newly Built Homes
• Before April 1, 2024: For properties registered before this date, the fair market value plus construction costs must be below $500,000 (or $525,000 for partial exemptions) to qualify for an exemption.
• After April 1, 2024: For homes registered on or after this date, the property’s value plus construction costs must be under $835,000 (or $860,000 for partial exemptions). Additionally, you must move into the home within one year of the registration date.
Other Costs
3. Legal/Notary Fees
To complete the legal paperwork, expect to pay between $1,000 and $1,650 for notary or lawyer services.
4. Property Tax Adjustments
Buyers may need to reimburse the seller for any prepaid property taxes. If you have a mortgage, the lender may require monthly payments for property tax. Your notary or lawyer will handle these calculations.
5. Home Inspection
A home inspection, though optional, is highly recommended and typically costs between $500 and $900 depending on the property’s size and features.
6. Insurance
Most lenders will require property insurance, particularly fire insurance. Additional types of insurance may also be required.
7. Appraisal
Some lenders require an appraisal to confirm the home’s market value, which usually costs between $300 and $500. Your mortgage broker may cover this cost.
8. Mortgage Insurance
If your down payment is under 20%, you'll need mortgage insurance from CMHC. The premium is added to your mortgage, but there’s a small application fee. Speak to your mortgage specialist for more details.
9. Title Insurance
Title insurance protects you and your lender from potential issues related to the property title. Costs can vary, so consult with your lawyer or mortgage broker for specifics.
10. Goods and Services Tax (GST)
A 5% GST applies to the purchase of new homes. Some rebates are available for homes under $450,000. Make sure to clarify any exemptions with your lawyer or notary.
11. Strata Fees
If you’re buying a strata unit, there will be monthly strata fees for maintenance and upkeep, typically due on the first of each month.
12. Move-In Fee (Strata Units)
This fee, charged by strata units, is applicable upon moving in.
13. Adjustments
At closing, you may need to reimburse the seller for prepaid utilities or strata fees on a pro-rated basis.
14. Moving Costs
Relocation expenses will vary depending on the distance and whether you hire professional movers or handle it yourself.
Final Thoughts
Understanding these costs will give you a clearer picture of what to expect when closing on your new home. If you have any questions or need further assistance, don't hesitate to reach out—I'm here to help!
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