What are closing costs?
Closing costs are the fees, taxes and other expenses you pay when you buy a new home.
You pay a number of fees when you are investigating whether to buy the home. These initial costs can include:
- surveys
- appraisals
- charges registered on title
- legal fees to review a contract
You pay different costs on the closing of your transaction. These closing costs can overlap with your initial investigation costs, and often include:
- taxes
- insurance fees
- legal fees to complete the conveyance work
- mortgage broker fees
- registration costs
- search fees
- fees for strata documentation
- plans
We will prepare a financial statement for you as part of your closing paperwork. This document is called a statement of adjustments. It will include these closing costs along with other items you are responsible for paying.
We draft these statements of adjustments based on the information we get from you and other sources. We will review it with you. It is always your responsibility to ensure the information in it is correct.
Here is more information on some of the more common closing costs:
Taxes
There are a wide range of taxes to consider in every home purchase. You might see some or all of these tax items on your statement of adjustments.
Property Transfer Taxes
Property Transfer Tax is a provincial tax. You pay property transfer tax when you buy property registered in the BC Land title system. This amount is calculated by a formula, and is affected by:
- the size and location of the property
- whether you are a citizen or permanent resident of Canada
- whether you qualify for an exemption
- the value of the property
Some exemptions are available for property transfer tax. These include first time home-buyers, or buyers of new property.
Municipal Property Taxes
The BC Government issues tax bills for each property every year. Property taxes are an annual bill, paid over a calendar year. The property tax bill is issued in the middle of the year (June or July for most municipalities).
We will get a copy of the tax certificate for you. Your statement of adjustments will show the cost to buy this certificate, and your portion of the annual taxes.
GST
Goods and Services Tax is applicable on purchases of real property, unless they qualify for an exemption, such as “used residential property”.
GST is not always specified in contracts. Sellers must make a declaration confirming whether GST is payable or not. It is still up to you, as the buyer, to ensure that you are considering whether they should pay GST. Never ignore this issue!
If GST is payable, make sure it has been included on your statement of adjustments.
If you’re not sure whether GST is payable, check with your accountant!
PST
Provincial Services Taxes might be payable if you buy things that aren’t included in the property’s purchase price. These could include:
- special furniture
- equipment, or
- other moveable items in addition to the property itself.
PST is not a common closing cost. Please make sure to let us know when you are paying separately for something when buying property.
Insurance
There are several kinds of insurance fees that you might have to pay when buying property.
Property Insurance
Property insurance is intended to help pay for various losses or damages to your property, such as fires or floods. It’s important to have property insurance no matter what kind of home you are buying.
Your lender will require proof that you have property insurance before they will fund your mortgage or line of credit. Your insurance company will charge us for this proof of insurance.
The cost for this proof of insurance will be included in your statement of adjustments.
Title Insurance
Title insurance protects against various legal issues like zoning problems, encroachments or registration issues. Lenders often require this insurance to cover their interests in the property. You can buy your own owner’s policy to protect yourself against these issues. The policy usually lasts until you refinance or sell the property.
We order title insurance for you at closing.
The cost for title insurance varies depending on the kind of property (strata versus single home versus First Nations). It is not possible to get title insurance for manufactured homes.
Strata Costs
There are two additional closing costs to consider for stratas:
- strata fees
- the cost for the strata documents required for the land title office and your lender
The Land Title Office and your lender require certain documents from the strata corporation. The cost to buy these documents for you varies based on who manages your strata, and when your closing date is.
It is not possible to use documents you might have already obtained from other sources. We must provide opinions and certifications on the information in those documents, so we need to order them from the source.
You will also see an amount for the monthly strata fees on your statement of adjustments. This amount depends on the cost of the strata fees each month, and your adjustment date.
Searches
In addition to the searches noted above, we also order a number of other searches for you.
Utilities Certificates
You might see two items on your statement of adjustments for utilities:
- the cost for utilities searches
- a line item sharing an annual or monthly utilities amount
Monthly or annual public utilities, such as water, sewer, garbage or recycling are often shared between a buyer and a seller.
Sometimes these services are provided by the municipality. If so, the costs for these utilities are shown on the tax certificate.
Sometimes they are not provided by the municipality, and we must order additional certificates from other public utilities companies.
Depending on where your property is located, that might mean we order no utilities certificates, or multiple utilities certificates. These certificates can range in cost from free up to $100 or more for multiple providers.
Plans
Not surprisingly, we want to make sure we are registering the right property in your name. To confirm this, we order a copy of the subdivision or strata plan from the Land Title Office to review with us.
The Land Title Office has been scanning in their plans over time. Newer plans are easily available at the Land Title Office. Older plans might not have been scanned in yet. There is an additional cost to obtain these older plans.
The cost for these plans ranges from about $20 to $100 or more.
Plans are not available for manufactured homes. Plans for First Nations properties might be included in the relevant lease or sublease
Surveys
Surveys can help point out a range of potential issues before you buy the property. They are generally done during the investigative process. It is often too late to arrange for a survey by the time your closing date comes around.
Survey costs vary, depending on the size and location of the property. Rural properties cost more to survey, and take longer to get to.
Appraisals
There are several different kinds of appraisals which your lender or you might wish to have. The costs for appraisals vary depending on who is arranging them, when they are done and how comprehensive they are.
If your lender is arranging the appraisal, they will likely charge you for that work. You will often see this fee deducted from the amount of mortgage proceeds sent to us. Occasionally they will waive this fee for you.
Appraisals ordered to investigate a specific issue will be more expensive than a “desk appraisal”.
The cost for appraisals also varies depending on the location of the property. It costs more to appraise a rural property, than an urban property. The appraiser will have to travel, and it will be more difficult to find comparable properties.
Home Inspections
A home inspection looks at a number of issues which might affect the usability or safety of your property. Home inspections are usually done in the investigative stage of your purchase. They are not generally included in a statement of adjustments.
The cost for home inspections varies on:
- where the property is located
- what you want inspected
- the size and age of the home
Legal, Lender and Broker Fees
You will see a line item on your statement of adjustments for legal fees. Legal fees can vary depending on the complexity of your deal. Things that affect these fees include:
- the location and type of property
- what kind of mortgage you are using
- whether you sign your lender paperwork at a bank branch or with us
- the complexity of your contract
- the number of buyers
- whether your transaction triggers fraud, money laundering or other similar issues
- whether you are using a Power of Attorney
The invoice from your notary or lawyer will generally include registration costs and other disbursements they incur on your behalf.
Lender and broker fees also vary. If you are using a big bank as a lender, that lender will generally pay the broker fees. If you are using a Schedule II bank, or a private lender, you will pay those fees yourself. You will see these fees on your statement of adjustments, usually as a deduction from your mortgage proceeds.
Questions?
Have questions on what kinds of closing costs you will incur? Send us your contract, and we’ll get your file started. Then we can give you an idea about what kinds of closing costs you might have to pay.