How Much Should I Expect to Pay on Closing Costs?
Whether you’re looking to buy your first home, or trading up to a larger one, there are many costs – on top of the purchase price – that you must figure into your calculation of affordability. These extra fees, such as taxes and other additional costs, could surprise you with an unwanted financial nightmare on closing day if you’re not informed and prepared.
Some of these costs are one-time fixed payments, while others represent an ongoing monthly or yearly commitment. Not all of these costs will apply in every situation, however it’s better to know about them ahead of time so you can budget properly.
Remember that buying a home is a major milestone. Whether it’s your first, second or tenth home, there are many important details to address during the process. The last thing you need is unbudgeted financial obligations cropping up hours before you take possession of your new home.
Read through the following checklist to make sure you’re budgeting properly for your next move.
Property Taxes
Depending on your down payment, your lending institution may decide to include your property taxes in your monthly mortgage payments. If your property taxes are not added to your monthly payments, your lending institution may require annual proof that your taxes have been paid.
Survey Fee
When the home you purchase is a resale (vs. a new home), your lending institution may ask for an updated property survey. The cost for this survey can vary between $700- $1,000.
Property Insurance
Home insurance covers the replacement value of your home (structure and contents). Your lending institution will request proof that you are insured as it protects their investment on the loan.
Legal Fees
Even the simplest of home purchases should have a lawyer involved to review all paperwork. Shop around, as rates vary greatly depending on the complexity of the issues and the experience of the lawyer.
Mortgage Loan Insurance Fee
Depending upon the equity in your home, some mortgages require mortgage loan insurance. This type of insurance will cost you between 0.5% -3.5% of the total amount of the mortgage. Usually payments are made monthly in addition to your mortgage and tax payment.
Moving Costs
The cost for a professional mover can cost you in the range of:
$50-$100/hour for a van and 3 movers, and
10-20% higher during peak demand seasons.
Maintenance Fees
Condos charge monthly fees for common area maintenance such as grounds keeping and carpet cleaning in hallways. Costs will vary depending on the building.
Local Improvements
If the town you live in has made local improvements (such as the addition of sewers or sidewalks), this could impact a property’s taxes by thousands of dollars.
Land Transfer Tax
Property Transfer Tax is payable by the Buyer when they make a purchase on a property, it is a land registration tax. It must be paid when an application for a taxable transaction is made at any Land Title Office in British Columbia to register changes to a certificate of title. Property Transfer Tax is payable on the fair market value of the property being transferred.
Property Transfer Tax is calculated as follow:
1% on the first $200,000 of the fair market value (which is usually the agreed price)
and 2% on the balance.
Example:
Agreed price on property is $1,000,000
1% on first $200,000 = $2,000
2% on balance ($800,000) = $16,000
Total: $18,000
*First-time Homebuyers incentives
For more info on Property Transfer Tax, please go to:http://www.sbr.gov.bc.ca/business/property_taxes/property_transfer_tax/ptt.htm