Costs & Savings for Buyers - A Homeowner's Guide

costs & savings

and other considerations for home buyers

Purchasing, Closing Costs and Other Considerations for Home Buyers

Thinking of buying your next home soon? Get to know what costs you need to budget for and what due diligence you should consider. Whether you’re a first-time buyer, upsizing or downsizing, these typical costs and considerations can help plan your next move.

Making An Offer

A deposit counts towards you mortgage down payment and is typically paid within 24hrs of an accepted offer or upon final subject removal. This will be used as collateral to secure your offer with the Seller and included in the final purchase price of your home. Typically paid into your representative’s Brokerage Trust Account by a Bank Draft, Certified Cheque or Electronic Transfer, it will be disbursed through your closing lawyer or notary upon Completion. There is no minimum required amount for a deposit, but a nominal figure (5%+) is recommended to show the Seller your financial capability to purchase the home.

The BC government’s new legislation to enact the Home Buyer Rescission Period will provide home buyers a 3 day period to cancel their accepted offer. The penalty to walk away during this rescission period will be 0.25% of the purchase price and paid to the Seller. Home buyers will need to budget for the potential added deposit or penalty. Speak with Carly Salvetti for additional requirements of the new legislation.

deposit home inspection

One of the most important steps to finalizing your purchase decision, the home inspection will not only outline any defects of your potential new property but will also help you operate and maintain any building systems (heating, air circulation, water distribution, and electrical among others). The cost of this service will vary but typically runs from $600 - $1,200 depending on the size and complexity of the home.

Optional Due Diligence

oil tank scan

When considering single-family homes built prior to neighbourhood gas distribution (circa 1960s) an oil tank scan of the property is extremely important. Leaking oil tanks can result in significant remediation costs and potential legal issues. The BC Fire Code and municipal by-laws require that underground oil storage tanks be removed and contaminated soil replaced, with the responsibility for the removal and remediation falling on the current property owner. The fee for a basic residential scan ranges from $100 - $200 or you can opt for a more thorough search with ground penetrating radar at a higher cost.

property survey

Some properties may necessitate a survey to formally determine the lot boundaries and any easements or rights-of-way. This may be required by your lender, needed for new construction or prudent to complete during your due diligence phase of the purchase. This fee will depend on the complexity of the property, but typically costs around $500 or more.

contractor visit

If you plan on renovating or redeveloping a property, having a licensed contractor attend a viewing or during your subject removal period may be beneficial for an estimate or to determine the feasibility of your plans.

radon testing

Radon is a colourless, odourless and tasteless gas formed by the breakdown of uranium found in soil, rock and groundwater. It is one of the leading causes of lung cancer and seeps into the air through basements and crawl spaces. Some home inspectors will offer a radon test as an added service or at home kits are also available for your current residence.

emf scan

The Electro Magnetic Field Scan is something to consider when your potential new home is adjacent to Hydro transmission lines, transformers, cell towers, or if you are particularly sensitive to magnetic fields.

Mortgage Financing & Fixed Costs

mortgage default insurance

If you plan on financing your home with a high-ratio mortgage (less than 20% down), you are required to buy mortgage default insurance (CMHC Insurance). The good news is that this is typically added to your total borrowing costs and amortized over the life of your mortgage, so you won’t need additional funds to cover this expense.

appraisal fee

Prior to the approval of your new mortgage, you will likely be required to have the property appraised. Your lender may cover the cost, otherwise this fee will range from $200 - $350.

property transfer tax

Property Transfer Tax is payable to the Provincial Government by purchasers of real estate and applies to all types of properties. It is calculated as 1% on the first $200,000, 2% on the amount between $200,000 - $2,000,000, 3% between $2,000,000$3,000,000, and 5% of the remaining fair market value above $3,000,000. There are several programs available in BC to reduce or eliminate your Property Transfer Tax costs, see additional information on the next few pages.

gst

The 5% provincial GST applies to newly constructed or substantially renovated homes in British Columbia and is payable on the purchase price. The tax does not apply to used residential housing unless it falls within certain categories - strata hotel, short term rental, mixed use or other similar designations.

home insurance

Your lender will require you to have home insurance in place on the Completion Date. Some basic information regarding the property will be needed to obtain a quote from a broker or insurance company, contact your representative or review your home inspection for the required information. If you are purchasing in a strata complex, this will be separate from the building policy, and you will need insurance to cover your condo contents, improvements and deductibles. Additional coverage may be required if the strata deductibles are above typical policy limits (e.g. water and sewer).

legal fees & disbursements

Buyers and Sellers will need a chosen lawyer or notary to assist in completing the transaction. They typically charge a base fee and have additional costs for Land Title Registration, cost to order certain strata documents, Title Insurance and other administrative fees. Legal fees and disbursements typically cost from $800$1,500 and the cost will depend on the type of transaction (strata, leasehold or fee simple).

adjustments

The statement of adjustments is prepared by your lawyer or notary and will outline prepaid or unpaid costs that need to be reimbursed or adjusted between the Buyer and Seller. These will include any prepaid property taxes, utility bills, strata fees or monthly rent/security deposits.

commission

In most cases, if you are purchasing real estate in British Columbia, you will not have to pay a commission directly to your chosen representative. Realtors are typically paid by the Seller’s Brokerage after ownership is transferred; the total commission will vary depending on the purchase price and cooperating commission offered by the listing brokerage. While the Buyer does pay the commission indirectly from the purchase price, they are not typically responsible for commission as an added cost on top of the final purchase price.

Post-Closing Costs

moving costs

The price to hire professional movers will vary depending on distance travelled, total duration and packing requirements. Obtaining quotes from several companies and inquiring about their hourly cost structure will help compare your different options. Flexibility with your moving date can also yield significant savings if you are able to coordinate it mid-month or mid-week.

utility hook-up fees

Depending on your service provider, you may need to pay an additional installation or hook-up fees for new hydro, gas, internet, cable and phone connections.

locksmith

You may want to get new locks installed in all exterior doors after you move-in. The previous owners may have given keys to friends, family or previous tenants and new locks are a good way to ensure safety and security in your new home.

strata move-in fee

Some strata buildings have a bylaw that require you to pay a damage deposit and a move-in fee. Check the strata bylaws for specific information on your building. The funds collected by the strata will be noted on their financial statements and often generates revenue for the complex.

Exemptions & Tax Rebates

home owner grant

The Home Owner Grant can reduce the amount of annual property tax you pay for your principal residence. This grant is available to homeowners who pay their property taxes to a local municipality, or to the province if they live in a rural area. The standard grant available is $570 for homes located in the Capital Regional District, Metro Vancouver and the Fraser Valley. For other areas of the province the amount is $770. The grant is only available for your principal residence and the property must be under the maximum value - the grant threshold for 2023 is $2,125,000. For more information, Click Here .

newly built home exemption

Planning to buy a presale or previously unoccupied home? The newly built home exemption reduces or eliminates the amount of property transfer tax you pay on a newly built home. To qualify you must be a Canadian citizen or permanent resident and use the property as your principal residence for 1 year. It must also have a fair market value under $750,000 to receive the full exemption; a partial exemption applies to properties between $750,000 - $800,000. For additional requirements and qualification, Click Here .

new housing gst rebate

There is a potential rebate of the federal portion of GST paid for purchasers of new housing or substantially renovated homes. If your new home is under the threshold of $450,000 you may be able to qualify for a partial rebate of your GST paid. To qualify, the new home must be either used as your principal residence or by a tenant for at least 1 year. Your Closing lawyer or notary can help you claim the rebate, or you can apply after closing. For more information, Click Here .

First-Time Home Buyer Programs

ptt exemption

The First-Time Home Buyers’ Program will help reduce or eliminate the amount of property transfer tax owing when purchasing your first home. To qualify, you must be a Canadian citizen or permanent resident and never owned a principal residence anywhere in the world. It must be used as your principal residence and have a value under $500,000, with a sliding scale up to $525,000. For additional qualification information, Click Here .

incentive

The First-Time Home Buyer Incentive helps new purchasers reduce their monthly mortgage payments through a sharedequity mortgage with the Federal Government. First-time buyers can receive a sum equal to 5% of the purchase price of a resale (existing) home or 5 - 10% of a newly constructed home. This helps reduce the required down payment and therefore the monthly payments associated with a mortgage. Home buyers must repay the incentive amount after 25 years, or when the property is sold. The federal government also shares in the upside or downside of the market value of the home, with a maximum gain/loss of 8% per annum. There are several qualification requirements, including a maximum income threshold - For more information, Click Here .

home buyers’ plan

The Home Buyers’ Plan (HBP) is designed to help first time buyers withdraw from their RRSPs to buy or build a qualifying home. You can withdraw up to $35,000 and the HBP allows you to pay back the funds within a 15-year period. To qualify, you must be considered a first-time buyer, a resident of Canada and intend to occupy the home for 1 year. For additional information, Click Here .

tax credit

The First-Time Home Buyers’ Tax Credit (HBTC) is a $10,000 non-refundable tax credit when you file your taxes the following year and can yield you a total tax rebate of $1,500. Qualifying homes must be located in Canada and used as a principal residence registered in you or your partner’s name. For more information, Click Here .