Now as often as we have heard the term closing costs, generally speaking people do not understand exactly what costs are involved. They may underestimate the costs or even be under the impression that the other party will pay them. I am here to help you expect the unexpected and hopefully prepare you so as to avoid any nasty surprises on closing.
The information below is meant as a general guide to the types of costs you can expect. While I do try to accuracy, it is important to understand that these fees, costs and figures are frequently updated. Always double check with the professionals who are helping you to complete the purchase of your home to ensure you have a proper list of costs for your situation.
Many closing costs are due upon the completion of the purchase of your home. These costs are separate from your actual purchase price and your mortgage, however some mortgage related costs may be added in to your mortgage. You should speak with your mortgage broker, lender or legal advisor for up to date details on this topic.
When buying a property you should consider the costs listed below. Aside from the obvious (being the purchase price) some other costs you may need to consider are:
- BC Property Transfer Tax
- Property Inspection
- Property Insurance
- Title Insurance
- Lawyer Fees
- Land Title Office Transfer Costs
- Mortgage Preparation Costs
- Property Tax Adjustments
- Municipal Utilities Adjustments
- Rent Adjustments (Seller’s Cost)
- Interest Adjustments
- Strata Fee Adjustments
- Strata Forms
- Move In Fees
Some of these costs may not apply to your situation, and there may be others not listed here. Helping you determine the costs you will need to be prepared for is one of the services I can provide for you. Read on for additional details on some of these costs.
BC Property Transfer Tax:
This is a provincial tax and it is payable most times when there is a transfer of title to property. The tax is charged at 1% on the value of the property up to the first $200,000 and at 2% on the remaining value.
The government has put incentives in place to encourage first time homebuyers to purchase property. Some buyers will receive a full exemption from the property transfer tax on properties up to a price of $425,000, and properties between $425,000 and $450,000 may qualify for a partial exemption. Visit my link page for further information.
The fees for this vary as every property is different, but you can expect to pay $400 and up for most properties. Although an inspection is optional, the buyer should always get an inspection. An inspection is well worth the cost if it saves you thousands of dollars on unseen problems.
Your lawyer or notary fee may cost anywhere between $900 and $1500 for a simple residential conveyance. Disbursements, such as the registration cost of filing the transfer at the Land Title Office, will be added on to this. Like an inspection, ensuring you have the proper legal advice on your purchase is vital. While it may be tempting to search out the cheapest rate, it is much better to pay a little more and know you are well taken care of. Your home is likely your biggest asset, and it is important to make sure all the I’s are dotted and the T’s are crossed on the conveyance.
This is interest that you will pay for receiving the mortgage funds outside of your payment period (e.g. if you complete your purchase on the 21st day of a 30 day month). The interest you owe is on 10 days. From then your regular cycle will start again. Your lender will probably take this initial interest payment in the same way it will take your regular mortgage payments.
The importance of insuring your property against fire, flood and other common hazards goes without saying. In fact, if you have a mortgage on your property, sufficient property insurance will be a lender’s condition of funding. Depending on your property fees can vary.
Where a current survey of the property is not available, your lender will likely require title insurance. These policies guard against risks associated with such issues as building placement, zoning and claims on title to the property. These policies start around $200 for lender coverage and there is an option to extend coverage to the homeowner for an additional fee. Title insurance is generally not required for strata property.
Property Tax Adjustments:
Property taxes are due every July for the current calendar year. So if you pay taxes in July of 2011, you are paying the taxes for all of 2011. If you purchase a property before July, the seller will reimburse the buyer for the days the seller owned the home from January 1 until the adjustment date. The buyer will be responsible to take the money that was paid by the seller and pay the full amount at City Hall in early July. If the property is purchased after taxes have been paid in July, the buyer will reimburse the seller for the portion of the year that the buyer lives in the house from the adjustment date until December 31. Municipal utility costs are often adjusted in a similar way.
Although this is not a cost to the buyer, it is important to be aware of rent adjustments. Given that there are many income suites and investment properties in Vancouver, this is a common situation. If a tenant is in the home you are purchasing, the seller will need to transfer the tenant’s security deposit to you at closing. The seller will also need to pay any prepaid rent to the buyer. For example, if a tenant has paid rent for the month of July on July 1 and the adjustment date is July 15, the buyer is entitled to the rent for the portion of July that the buyer owns the home.