Whether you’re a first-time homebuyer or not, the closing costs associated with purchasing a property can come as a surprise. It is essential to make sure you have a budget set aside for these costs, as you’ll need to provide proof that you have enough funds for a downpayment and closing costs to qualify for a mortgage. In order to make sure that buying your first home doesn’t come with any unwanted surprises, we have created this guide to help you plan ahead.

Mortgage Costs

Mortgage Application Fee

When you’re looking into getting a mortgage, it’s important to remember that some banks or lenders will charge you an application fee. This fee isn’t usually charged by institutional lenders, but it is something to be aware of when you’re comparing different mortgages.

Mortgage Default Insurance

If you’re looking to purchase a home and may be in need of a mortgage for more than 80% of the appraised value of the home, it’s important to be aware that you may need to take out a mortgage default insurance. To help make this process easier, Canada Mortgage Housing Corporation (CMHC) has a handy premium calculator to help you estimate this additional cost. It’s important to be aware of this cost, as it helps the bank by ensuring that even in the event the value of your home isn’t sufficient to repay the mortgage debt, they won’t lose out.

Appraisal Fee

If you’re getting a loan from the bank, they might need an appraisal of the home. In this case, you’ll likely be in charge of covering the cost of the appraiser.

Survey Fee

When buying a new property, it’s important to understand where exactly the boundaries and buildings in the area are located. This requires obtaining an up to date Survey Certificate, which is prepared by a professional Land Surveyor. Depending on your location, this can come with a cost. Additionally, your bank may require that you present the Survey Certificate before they are willing to proceed with the purchase. If the previous owners didn’t provide the certificate, you may need to pay for the surveyor’s fee.

Title Insurance

Many lenders require title insurance before they approve a mortgage loan. Title insurance protects both the lender and the buyer from possible issues with the ownership of the property that are not immediately obvious, like a previous owner making a mistake in their title documents. For in-depth knowledge about title insurance policies, please refer to our post, “What is Title Insurance?“.

Government Taxes

Property Transfer Tax

Are you buying a home in British Columbia? If so, you should know some important information about the Property Transfer Tax (PTT). This tax is collected by the provincial government and must be paid before you can legally transfer the property to a new owner.

The PTT is calculated based on the purchase price of the home. For example, the tax rate is 1% of the first $200,000, 2% of the value up to $2,000,000, and 3% of the remaining value. Fortunately, certain buyers, such as first-time homebuyers, may be exempt from this tax under certain condition.

Property Tax and Municipal Utilities

Many people don’t realize that when they purchase a house, they are responsible for their share of the current year’s property tax (and utilities, if billed separately). This means that if the current owners of the house have already paid the city in full for the year, you will need to reimburse them the amount they paid.

GST

If you’re buying a brand new home or one that’s been recently renovated, you may have to pay an additional 5% of the total cost in GST. Don’t worry, though — there are some special rebates available, depending on the value of your property.

Other Fees

Home Inspection Fees

Getting a home inspection can be a great way of avoiding future problems with the property you’re looking to buy. Even though it’s not an absolute requirement, it gives you peace of mind, knowing you won’t be held responsible for any major defects that you may not have been aware of.

Legal Closing Fees

When you’re buying a property, you’ll need to hire a notary public or lawyer to review the contract and title, create documents to make the purchase, take care of the money exchange, and make sure the ownership of the property is transferred and the mortgage is secured. These professionals typically charge a fee for their services, plus any extra costs they incur while making sure everything is done properly. Don’t worry though; there’s competition in this field, meaning their rates will be fairly standard. You might also hear the term ‘conveyancing’ used to refer to this process; it’s just another word for transferring the legal rights of the property from the seller to the buyer.

Land Title Registration Fees

Whenever a title is registered with B.C. Land Title and Survey, a fee is usually required. This fee can usually be included in a lawyer or notary public’s accounts as a disbursement and will be taken care of as part of the process.

Utility Bills

As a friendly reminder, if you purchase a home, you will be expected to cover any utility bills (like water, sewerage, garbage, recycling, drainage) that have already been pre-paid to the city.

Strata Fees

If your purchase is part of a strata lot, it’s always a good idea to reach out to the strata manager to find out when your strata fees are due – they may be due shortly after you move in.