What are closing costs?
Closing costs include additional fees beyond the purchase price of your home. These expenses include legal fees, disbursements, land transfer taxes, and moving expenses. Closing costs are estimated to be around 1.5% of the purchase price, but they can vary depending on your situation. Below is a list of what is included:
Land Transfer Tax
Land transfer tax is a fee payable on the purchase of real property in British Columbia. Sample calculations can be found here: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/calculation-examples
First Time Buyer Rebates
First-time buyers may be eligible for rebates or discounts on land transfer taxes. Check the following link or consult your lawyer to confirm eligibility. For more information, please refer to the following link: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers
Legal representation for a home purchase and mortgage typically ranges around $1,100. Selling a property concurrently may add an additional cost of approximately $900. Please note that lawyer pricing may vary, but this is an approximate range to anticipate.
Interest Adjustment Explanation
Interest adjustment is the date when your lender starts calculating the interest you’ll pay. It usually occurs on the first day of the month after the completion date. For instance, if your completion date is June 20th and you opt for monthly payment frequency, the interest adjustment date would be July 1st, and your first full payment date would be August 1st.
Title insurance/Survey Certificate
Most banks now require title insurance, while some may still accept a survey certificate. Your chosen lawyer or notary can explain the differences between the two options and provide guidance on pricing.
A professional appraiser evaluates the market value of the property. This assessment is required for conventional mortgages (where the down payment is 20% or greater), private transactions, and properties intended for investment purposes. The appraisal ensures that the lending institution is not over-lending on the property and protects you from overpaying. A standard residential appraisal typically costs around $375.
While not mandatory by the bank, a property inspection is highly recommended. It involves a comprehensive evaluation of the home’s structure, systems, and components, providing you with insights into its condition. The inspection report covers areas such as foundations, electrical systems, plumbing, heating, appliances, and more, helping you make an informed decision about the property’s condition.
Property Tax Adjustment
Property taxes for the calendar year are typically due in early July. If you purchase a property before July 1st, the seller will reimburse you for the days they owned the home from January 1st until the completion date. From there, you are responsible for paying the full amount to the municipality on July 1st. If you buy a property after July 1st, you’ll compensate the seller for the days you own the property until December 31st since they have already paid the full amount to the municipality. To calculate the precise amount, take the annual taxes, subtract the $570 homeowner grant (estimate), and divide by 365.
To safeguard against potential losses, the bank requires borrowers to arrange adequate insurance coverage for the property. The lender will provide the specific address where the insurance binder should be sent to your lawyer. This proof of coverage, supplied by your insurance agent, ensures your interests are protected.
Mortgage lenders insist on fire insurance to guarantee that, in the unfortunate event of a fire, the home will be rebuilt to a standard that safeguards their collateral. While fire insurance typically applies to houses and not strata units like townhouses and condos, it offers valuable protection for your investment.
Note: Lenders typically request proof that you have at least 1.5% of the purchase price for closing costs, although this is an estimate and not the actual amount. Please be aware that every home purchase involves unique costs. Closing costs provided are estimates and may vary. To verify the specific details, we recommend consulting your lawyer/notary.
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