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Understanding Closing Costs for Homebuyers in Canada
When people think about buying a home, they think about the down payment and the mortgage amount. But, there are several other closing costs that come into play that people don’t always consider.
In this article, I will help you understand closing costs and what you can expect to pay out of pocket during the home buying process.
The biggest closing cost that you can expect are your legal fees. When you purchase a home, the transaction has to be put through with a lawyer or notary. They charge a fee to prepare the necessary documents to make the purchase official!
They will pull any necessary title searches, ensure that all legal documents are completed and filed correctly and work with your lender to facilitate and complete the financial transaction.
Different lawyers charge different fees. If you’re looking for a lawyer locally, please reach out to me and I can provide you with some options and recommendations.
Title insurance is something you will pay with the lawyer. This type of insurance protects you against loss caused by defects on the title of the property, including real estate title fraud.
Property transfer tax
When you purchase a property that is registered at the Land Title Office, you (or your legal professional) will have to file a property transfer tax return and you must pay this tax unless you’re exempt.
This tax is based on the fair market value of the property on the day that it was registered to the land office. In a purchase transaction, this is the purchase price.
To understand more about property transfer tax and what you can expect to pay, read my article “Everything You Need to Know about Property Transfer Tax.”
Appraisal fee (if required)
Another closing cost you may be on the hook for is an appraisal if it’s required by the lender. An appraisal is used to confirm the value of the home that you are planning to pay for it. If an appraisal is needed, I will call for the appraisal and the client will pay for it.
Depending on how the appraisal comes back, this can change your mortgage approval amount.
GST (on new builds)
If you are buying a new build, you will have to pay GST on the purchase.
If you live in BC, the GST is 5%. So, if you are purchasing a new condo for $600,000, you’ll be responsible for paying $30,000 upfront for the GST. Your GST payment can always be included in financing, so please be sure to speak to me about that during the mortgage process.
You may be able to claim a partial GST rebate on your income tax, which is very helpful.
If during the home buying process you had a home inspection done, as the buyer, you will be required to cover that cost. Home inspections may not be mandatory, but can be recommended depending on the state of the home.
The final main thing that you need to prepare for is your home insurance costs. Homeowner insurance will protect not only the structure of your home in case of damage but also covers your personal belongings. This insurance needs to be in place before closing and will begin the day that you take ownership.
This cost will be ongoing and paid annually or monthly.
Reach out to me to learn more about closing costs.
If you have any questions about these closing costs, please give me a call. I am happy to discuss the costs and what you can expect to pay. There may be more closing costs depending on your purchase and situation and we can discuss those together if that is the case. You can give me a call at 250-826-3111 or send me an email through my website.
If you have no questions about closing costs, and are ready to start the mortgage process, apply on my website today and let’s start the process together!