Navigate the BC Real Estate Market with Expert Tips and Discover Valuable Tax Exemptions for First-Time Home Buyers
When it comes to purchasing a home in British Columbia, understanding the full spectrum of costs is crucial. The purchase price is just one piece of the puzzle, and it's essential to grasp the comprehensive expenses associated with buying a house before you secure your deal. This foresight will not only help you determine your financial comfort zone but also prevent last-minute scrambling to gather the necessary funds.
In this comprehensive guide, we will walk you through the expenses you should consider before, during, and after the completion of your purchase.
Subject Removal Costs When Buying a Home in BC:
After your offer is accepted, there are specific costs to be aware of during or immediately after the subject removal phase. Here are the primary expenses associated with subject removal:
1. Property Appraisal - Typically priced between $300 and $450 plus GST, an appraisal is often required by lenders to assess the home's value.
2. Home Inspection - This expense, ranging from $400 to $800 plus GST, is paid to the inspection company and is the responsibility of the buyer. In some cases, the seller may have conducted a pre-inspection, or you may choose to waive the inspection altogether.
3. Deposit - Usually equal to 5% of the purchase price in Greater Vancouver, this deposit is paid upon or within 24 hours of your offer being accepted. It is made out to the buyer's agent's brokerage in trust and forms a part of your down payment.
Closing Costs when Buying a House in BC:
Once the subject removal is completed and as you approach the completion date, your lawyer or notary will prepare a statement of adjustments for you to review your debits and credits, providing a final amount that you owe.
Here are the primary costs to consider on the closing day:
1. Balance of the Purchase Price - The difference between the purchase price and your initial deposit. Most of this amount comes from your lender and becomes your mortgage.
2. Legal Fees - The cost varies depending on the purchase price and the lawyer or notary you choose. It includes expenses such as ordering a title search and registering the title, typically amounting to around $1,300 to $2,200.
3. CMHC Insurance Premium - This premium is charged if your down payment is less than 20%. Your mortgage broker may include it in your monthly payment.
4. Title Insurance - Often included in your legal fees, this expense typically ranges from $250 to $400.
5. Strata Documents - Usually ordered by the listing agent or the property, but an updated Form B may be required by the lender or lawyer if there's a long completion period. A rush order may add an extra $100 to $200 to the cost.
6. Strata Move-in Fee - This one-time fee varies among strata properties, but it's safe to estimate around $100 to $300, with some properties charging up to $500.
7. Property Survey Certificate - In some cases, lenders may demand a property survey, with costs starting at $500 plus GST. Note that this is not required for strata properties.
8. Home/Fire Insurance - Lenders often require home insurance, with coverage typically needed on the completion date or when funds are placed in trust. Most lenders mandate fire and extended coverage insurance, along with liability insurance.
9. Property Transfer Tax (PTT) - The PTT rate for most residential properties is calculated as follows:
1% on the first $200,000
2% on the portion above $200,000 up to $2,000,000
3% on the portion above $2,000,000
An additional 2% for properties exceeding $3,000,000
First-time home buyers may be fully exempt if the purchase is under $500,000. Partial exemptions apply for purchases between $500,000 and $525,000, with no exemption beyond $525,000.
***For more information on property transfer tax and potential exemptions, read our blog post here: Property Transfer Tax Information in BC
10. Foreign Ownership PTT - an additional 20% of the fair market value is charged if your title is transferred to a foreign entity. If this is purchased with an entity that is not deemed a foreign buyer, then it is only 20% of the proportionate share. This applies to foreign buyer purchases in the following regions:
The additional property transfer tax doesn’t apply to properties located on Tsawwassen First Nation lands.
*Note: As of January 1, 2023, there is a Canada-wide foreign buyer ban in effect for a total of TWO years.
11. Property Tax Adjustment - Property taxes are usually paid on July 1st for a full year. If your move-in date is after July 1st, you may need to reimburse the seller for taxes paid beyond the closing date.
12. Adjustments for Utilities/Condo Fees, etc. - This reimburses the seller for prepaid utilities, water fees, strata maintenance fees, etc., with the amount varying.
13. Adjustments for Rentals and Security Deposits - In cases involving rental portions or taking over a rental, the security deposit should be credited to the buyer. Additionally, if the move-in date is beyond the monthly rental payment date, the seller should credit the buyer for a portion of that month's rent.
14. GST - This is a 5% tax based on the purchase price, typically applicable to newly built homes, such as presale condos. A GST rebate, equivalent to 36% of the 5% GST paid, is available for new homes priced up to $350,000, with a partial rebate for homes up to $450,000.
For more information on GST and when you need to pay it, read this blog post: Gross Services Tax (GST) in Real Estate
15. Mortgage Broker Commission - If applicable, this cost is usually covered by the lender.
What You Need to Pay For After Closing:
Moving Expenses (typically over $1,000)
New Locks (cost varies)
Household Goods (cost varies)
Utility Connection Charges (cost varies)
Redecorating and Renovating Costs (cost varies)
Immediate Repair and Maintenance Costs (cost varies)
Elevator or Move-in Deposit (refundable by the strata)
Understanding Buyer Tax Exemptions:
One crucial aspect to be aware of is the availability of tax exemptions that can significantly reduce your closing costs. Notable exemptions include:
For instance, the first-time homebuyer property transfer tax exemption can save buyers up to $8,000 if their purchase is under $500,000. The cost difference for a purchase just over or just under $500,000 is significant, making this exemption a valuable consideration.
Why Hire a Realtor?
While this guide delves into the various costs involved in home buying, it's important to note that hiring a realtor is a free service to you. When making one of the most significant decisions in your life, a realtor can guide you through estimating costs, understanding homeownership, negotiating contracts, and navigating the entire purchasing process. At the end of the day, a realtor is your trusted partner in ensuring you make a well-informed investment.
If you're in the market to buy or sell a home and you're seeking the expertise of a dedicated realtor, don't hesitate to get in touch. You can reach me at 778-233-8366 via call or text. If you prefer email as your communication method, feel free to send me a message at firstname.lastname@example.org. I’m here to assist you in finding the perfect representation for your home purchase needs. Feel free to contact me today, and let's get started on finding your dream home.