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Closing Costs for Buyer


When purchasing a home in British Columbia, it is a valuable step for the buyer to understand what closing costs could occur in order to plan successfully for the future. Some common closing costs include appraiser fees, property transfer tax (PTT), foreign buyer’s tax, title search and insurance fees, lender fees, insurance fees, disbursements and legal fees to cover lawyer or notary expenses. Hence, it is paramount for the buyer to distinguish what is included in the closing costs in order to identify potential hidden fees.


When do Closing Costs occur?


Closing costs are commonly recognized as the legal and administrative costs associated with purchasing a property. During the process of transferring a title from seller to buyer at closing, closings expenses are paid. Additionally, closing is commonly known as the final step of a home buying process. It is often recommended that a buyer should budget approximately 2% to 2.5% of the purchase price for properties that are under $3 M. in order to accommodate closing expenses.  ( for higher-value properties closing costs will increase.)


What are Appraiser fees?


An appraisal may be needed if a lender requires an unbiased and reliable evaluation. Appraisal fees vary from property to property as each home has its own unique factors. Hence, an estimate of an appraisal cost falls between a range of $300-$600 for a single-family home. In most cases, the borrower will be responsible for the appraisal fees.


What is Property Transfer Tax?


Property transfer tax is commonly recognized as a one-time land transfer tax that is paid at closing.

The PTT rate for British Columbia is set at 1% on the first $200,000 and 2% on the remainder of the purchase price balance greater than $200,000 and up to 2 million.

If a property is worth over 2 million dollars, then a 3% rate will be applied to the balance. Additionally, if a property is labeled residential and over 3 million, a further 2% will be applied to the portion of the sales price that is greater than 3 million.


When does Foreign Buyer’s Tax come into effect?


The foreign buyer’s tax is known as a 20% tax that is added on top of the property transfer tax (PTT) in some particular areas of British Columbia for a foreign buyer. Some more specific examples include a foreign national, foreign corporation or taxable trustee buyer.  


What is the CMHC Insurance Premium?


The CMHC insurance premium affects a property when the buyer has less than 20% down payment. When a down payment is under 20% of the purchase price, mortgage insurance on the loan is likely needed. CMHC stands for Canada Mortgage and Housing Corporation.


When is Home/Fire Insurance needed?


For some buyers purchasing a property with a mortgage, home insurance may be needed. Many lenders may make it a requirement for their borrowers to get fire and liability insurance.

 

Why are Legal Fees needed?


A lawyer or notary public will be a part of the process for the transfer of home ownership from the seller to the buyer. The notary public or lawyer will also have to record the transfer at a land title office. Hence, legal fees are a part of the home purchasing

process.


What may Legal Costs cover? 


Legal fees may cover the overall preparation stage of documents and include a thorough review of the documents relating to contracts of mortgages. Other topics covered can include the land title registration fee and title searches.


What is the total cost of Legal Fees?


Legal fees vary depending on the lawyer or notary chosen. An approximate amount can range from $1000-1500 when purchasing a home with a mortgage.

Is a Title Search Fee and Title Insurance Fee the same?

It is important to note that title insurance and titles searches are distinct from each other and not interchangeable phrases. Therefore, the fees are also not identical.


What is a Disbursement?


Disbursements are known as additional out-of-pocket expenses to cover the remaining random costs of purchasing a home. An example of disbursement can be an electronic signature fee.


Are there any additional costs?


There may be additional costs to cover aspects such as courier charges, filing fees, administration fees, unexpected complications or rush transactions.

For a strata property, the strata forms may cost an additional fee. In terms of a detached property, title insurance may or may not be included in the overall legal fee cost.


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