What Are Closing Costs?

You've found your dream home, the seller has accepted your offer, your mortgage has been approved and you're eager to move into your new home. But before you get the key, there's one more step--the closing.

Also called "Completion Date", the closing is the process of transfering the title of the property from seller to buyer. As a buyer, you will sign what seems like endless piles of documents and will have to present a sizeable check for the down payment and various closing costs. It's the fees associated with the closing that many times remains a mystery to many buyers, or an unexpected surprise. Many buyers simply hand over thousands of dollars without really knowing what they are paying for.

As a responsible buyer, you should be familiar with these costs that are both mortgage-related and government imposed. Although many of the fees may vary depending on your purchase price and property tye, here are some of the most common fees:

Property Transfer Tax

When a residence is purchased a Property Transfer Tax (PTT) is applied.  The tax rate is as follows:

  • 1% on the first $200,000
  • 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000
  • 3% on the prtion of the fair market value greater than $2,000,000 and up to and including $3,000,000
  • 5% on the portion of the fair market value greater than $3,000,000 if the property is residential 

Estimate the property transfer tax by using the Property Transfer Tax Calculator on one of our Real Estate laywer's web site and view the criterias for exemptions.  Here are a few of the exemptions available if one qualifies.

The First-Time Home Buyer's Program offers an exemption to the PTT if the fair market value of the residence is $500,000 or less.  In all regions there is also a proportional exemption for first-time buyers of homes with a fair market value up to $25,000 above the thresholds.  This means in the Greater Vancouver area, homes valued up to $525,000 ($500,000 threshold + $25,000 proportional exemption) will be charged a pro-rated PTT.

The Newly Built Home Exemption applies to homes being purchased as principal residences and must be moved into within 90 days after completion and lived in for at least one year.  A full exemption is available for homes purchased up to $750,000 and a partial exemption is available for homes between $750,000 and $800,000.

G.S.T (Goods and Services tax)

5% of the purchase price (G.S.T) is payable on the purchase of newly constructed or substantially renovated residential homes. Sunstatntially renovated is defined in the legislation as the removal or replacement of 95% of the house construction components except for the foundation, external walls, interior supporting walls, floor, roof and staircase.  5% G.S.T also applies on services rendered with your real estate purchase like lawyers fees, home inspection fees and appraisal fees. G.S.T does not apply on any used or, re-sale residential properties.

There are some rebates that apply as well as exemptions.  For some more information on G.S.T we have also included a link to one of our Real Estate lawyers web site.

Prepaid Property Taxes

Property taxes are either pre-paid on a bi-yearly basis or can be paid monthly.  Sellers are reimbursed any amounts that are pre-paid and that amount is calculated on a daily basis from when the buyer takes ownership of the property.

Prepaid Maintenance and Move-in fees

If you are buying a strata titled property, maintenance fees are collected on a monthly basis and are pre-paid for the entire month.  Sellers are reimbursed any amounts that are pre-paid and that amount is calculated on a daily basis from when the buyer takes ownership of the property. Some strata properties charge a move-in fee which is required prior to a new resident moving into his/her new property,  This fees can be collected by your lawyer/notary public on close of a property and be submitted for payment to the property management company on your behalf.

Appraisal

Before your lender approves your mortgage, you may be required to have an appraisal done.  Sometimes your lender covers this cost otherwise you are responsible for covering this cost.  The fees range from $150 to $350. 

Survey Fee

Your lender may require an up-to-date survey of the property.  If the seller did not provide you with one, you will have to pay to have one done.  The fee ranges from $500 to $1,500 depending on the size of the property and the type of survey done.

Home Inspection Fee

We highly recommend that you get a home inspection done by a certified home inspector.  Costs range from $400 to $600 for a condo/townhouse and $500 to $900 for most houses.  It's a small price to pay for peace of mind.

Legal Fees

Lawyers/Notaries fees for closing the sale can range according to the complexity of the deal.  They typically range from $800 to $1,200.

Home Insurance

If you are buying a non-strata property, home insurance on that property will be required to be in effect from the day of your Completion.  Premiums and costs will vary depending on the value and the type of coverage you get.  These costs can also be paid on a monthly basis.  Our suggestion is to consult with your insurance broker to provide you with these costs and the type of insurance that will best suite your needs.