If you’ve decided to buy a home, it’s important you understand all the costs involved in addition to the price you’re paying for the property. Here’s an overview.
Mortgage application Lenders may charge a mortgage application fee, which will vary depending on the lending institution. If you are borrowing part of your down payment through the BC Home Owner Mortgage and Equity (HOME) Partnership Program, there will be additional fees. Mortgage insurance As of October 17, 2016, all insured home buyers must qualify for the Bank of Canada’s posted five-year rate, now at 4.64 per cent. Borrowers must have a GDS ratio maximum of 39 per cent and a TDS ratio maximum of 44 per cent. As of November 30, 2016, borrowers with a down payment of 20 per cent or more (low ratio) must also meet the same loan eligibility criteria as high-ratio mortgages of less than 20 per cent. Learn more Appraisal fees Before your lender approves your mortgage, you may be required to have the property appraised. Sometimes your lender will cover this cost. If not, you’re responsible. The fee ranges from $300 to $450 plus GST. Land survey fees Lenders may require a survey of the property. The fee ranges and is typically $500 plus GST. Home inspection fees A home inspection is a report on the condition of the home and includes structural and moisture problems, as well as electrical, plumbing, roofing and insulation. The fees range and is typically $500-$900 depending on the size of the home and the complexity of the inspection. Some inspectors also charge an additional fee for an older home or a home with a secondary suite, a crawlspace, or a laneway home. Goods and Services Tax (GST) The GST on a new home is 5% of the price. A GST rebate equivalent to 36% of the GST paid is available for new homes priced up to $350,000 and a partial rebate on new homes priced up to $450,000. Buyers also pay the GST on fees for services from appraisers, home inspectors, lawyers, Notary Publics, and REALTORS®. Provincial Sales Tax The PST is generally not payable on services except for legal and notary fees. Both the GST and PST are paid on legal and notary fees. Property Transfer Tax Home buyers in BC pay a provincial Property Transfer Tax (PTT) when they buy a home. The tax is charged at a rate of 1% on the first $200,000 of the purchase price and 2% on the remainder up to and including $2 million. The PTT is 3% on amounts greater than $2 million.. Qualifying first-time home buyers may be exempt from paying the PTT if their home is priced up to $5,000,000. There is a proportional exemption for homes priced between $500,000 and $525,000. At $525,000 and above the rebate is nil. Qualifying buyers of new homes may be exempt if the purchase price of their home is priced up to $750,000. There is a proportional exemption for homes priced between $750,000 and $800,000. At $800,000 and above, there’s no rebate. An additional 15% PTT is charged on the purchase price to buyers in Metro Vancouver who are not Canadian citizens or permanent residents of Canada, and who don’t have work permits. Click here for the Property Transfer Tax fact sheet. Click here for more cost saving programs. Adjustments (see details in the Contract of Purchase and Sale) Property taxes Depending on the Contract of Purchase and Sale, a home buyer will likely be required to reimburse the seller for any prepaid property taxes. The lender may require the buyer to add property tax installments to monthly mortgage payments. See also Why do I have to pay property taxes on the house I’m buying. Utility bills A buyer is typically required to reimburse the seller for any prepayments for municipal utilities such as water, sewer, drainage, garbage, and recycling. Rent and security deposits If there is a secondary suite or a laneway home rental and the tenancy continues, the buyer receives the security deposit from the seller with accrued interest. The buyer is responsible for reimbursement when the tenant leaves. Mortgage life insurance If the owner dies, this type of insurance will pay off the balance owing on their mortgage. Fire and liability insurance Most lenders require property buyers to carry fire and extended coverage insurance and liability insurance. Home insurance Lenders typically require home buyers with a mortgage to buy home insurance. The insurance should be effective on the earlier of either the completion date or the date that the balance of funds is placed in trust. Legal or Notary Public fees Buyers typically hire a lawyer or Notary Public to assist with drafting documents and ensuring the title of the home is properly transferred. Likely fees include a:
- title search for a property, this costs up to $11
- land title registration fee, which is about $75
For more information about land titles, visit the Land Title and Survey Authority of BC at www.ltsa.ca. Moving fees Moving fees vary depending on the distance moved and whether professional movers do all of the packing. Utility hook ups There are fees for hydro, gas, water and sewer, cable, and phone connections. Locks New owners should always have door locks rekeyed. Costs depend on whether the locks are standard or electronic. Strata maintenance fees Typically paid on the first day of each month. Realtor fees Compensation is agreed to beforehand between you and your Realtor. Compensation can vary depending on your needs and the business model employed by the Realtor. Fees are typically paid to the real estate company, through a lawyer or notary, from the sale proceeds. Fees are paid on the completion date of the contract, or on the actual date the sale completes.