Don’t forget closing costs when buying a home
It’s easy to count your available cash, but remember that all of these cash savings cannot be used as your down-payment. There are last-minute costs, such as taxes, legal fees, appraisal fees, moving expenses, and home insurance to pay before you are finally in your new home. The time to budget for those “end” expenses is now. You must be prepared to pay most, and perhaps all, of the following closing costs.
Property Transfer Tax – The British Columbia Provincial Government imposes a property transfer tax, which must be paid before any home can be legally transferred to a new owner. Some buyers may be exempt from this tax. For further information, please view the Property Transfer Tax office website at www.sbr.gov.bc.ca/business/Property_Taxes/Property_Transfer_Tax/ptt.htm.
Goods & Services Tax – If you purchase a newly constructed home, you may be subject to GST on the purchase price. There may be some rebates available depending on the value of the home. For further information, contact the Canada Revenue Agency at www.cra-arc.gc.ca.
Property Tax – If the current owners have already paid the full year’s property taxes to the municipality, you will have to reimburse them for your share of the year’s taxes.
Appraisal Fee – When the lending institution requires an appraisal of the home before approving your loan, it may be your responsibility to pay the appraiser’s fee.
Survey Fee – The lending institution may also require that a survey certificate be presented to them. The purpose of the survey is to formally establish the boundaries of the property and to ensure that all buildings are within those boundaries.
Note: Lending institutions may ask for either a building location survey, which establishes where a building is located on a property, or a monumental survey, which establishes the actual boundaries of a property. If the current owner cannot provide a recent survey certificate, it will be your responsibility to pay the surveyor’s fee.
Mortgage Application Fee – Lending institutions may charge a mortgage application fee. This application fee may vary between lending institutions.
Don’t forget about last minute costs
Mortgage Default Insurance – This type of insurance is required on most mortgage loans in excess of 75% of the appraised home value. Its purpose is to ensure that the lender will not lose any money if you cannot make your mortgage payments and the value of your home is not sufficient to repay your mortgage debt. The insurance premium is paid to the lender and, in most cases, is added to the loan amount and paid for over the term of the
loan.
Life & Disability Mortgage Insurance – At your option, you may purchase insurance which will ensure that your outstanding mortgage balance is paid if you die or become disabled.
Fire & Liability Insurance – The mortgage lender will insist that you purchase an insurance policy which guarantees that, in the event of fire, the lender will receive the balance owing on the mortgage loan before you receive any insurance proceeds.
Legal Fees – The transfer of home ownership from the seller to the buyer must be recorded in the Land Title and Survey Authority Office in order to protect the new owner’s interests.
You will probably want to engage a lawyer or notary public to act on your behalf during the completion of your purchase. The lawyer or notary public will charge a fee for this service, plus disbursements, including the Land Title Registration fee. If you are financing your purchase with a new mortgage loan, there will be a further fee and disbursements to prepare and register the mortgage documents.
Other last-minute costs you shouldn’t forget to set some money aside for:
- home inspection fees
- moving expenses
- deposits required by utility companies
- household goods:
- kitchen appliances,
- garden equipment,
- garbage cans, tools, window coverings, etc.
- redecorating or renovations
A REALTOR® can explain further details on closing costs. Just remember to add them to your financial plan when saving to buy a home.
