What are the hidden costs when purchasing a home in BC?

So you’ve found the perfect place to purchase but you go to the lawyer and find out there’s more than just the purchase price? Potential homeowners often overlook additional costs associated with the purchase of a home. These extra costs add at least 3% to the purchase price.

You need to know about all the wonderful hidden costs of purchasing a home. Well they aren’t really hidden if you’ve done your homework. And for first-time buyers with minimum down payments, you may need to prepare yourself for the extra costs so as not to be overwhelmed.

These are the costs you may be responsible for when buying a home in British Columbia:

Property transfer tax (PTT)

PTT is calculated at 1% on the first $200,000 and 2% on the remainder of the purchase price.

Qualifying first-time buyers may be exempt from paying PTT if the home’s fair market value is $425,000 or less. There is a proportional exemption for homes priced up to $450,000.

You can visit the BC Ministry of Small Business and Revenue for further information on First Time Home Buyers’ exemption: www.rev.gov.bc.ca/rpt or call 250.387.0604.

Harmonized Sales Tax (HST)

If you buy a newly constructed home or substantially renovated homes, you must pay the 12 per cent HST.

Governments rebates on HST:

BC New Rental Housing Rebate (HST)

Buyers of new or substantially renovated homes priced up to $525,000 are eligible for a rebate of 71.43% of the provincial portion (7% of the 12% HST) paid to a maximum rebate of $26,250. Homes priced at $525,000+ are eligible for a flat rebate of $26,250.

Visit www.hstinbc.ca/faqs/new-housing-rebate for more information.

GST Rebate on New Homes

New home buyers can apply for a rebate of the federal portion of the HST (the 5% GST) if the purchase price is less than $350,000. The rebate is up to 36% of the GST to a maximum rebate of $6,300. There is a proportional GST rebate for new homes costing between $350,000 and $450,000.

For more information visit the Canada Revenue Agency at www.cra-arc.gc.ca and Enter ‘RC4028’ in the search box.

Home inspection

An independent inspection of the home can range from $350 to $1000 + HST for most single-family homes. But the cost varies depending on the home inspection company and the size of the home. Inspections are HIGHLY are recommended, to identify if there are any other potentially costly expenses – issues not visible to the naked eye – that may impact the costs and upkeep of the home.

You can visit my Resources page for a list of home inspection companies I recommend.

Prepaid property tax or utility bills

If a closing date is mid month or mid year, a seller may have already prepaid the property taxes, utility bills or maintenance fees. You should be prepared to reimburse the seller, your lawyer or notary will generally do these calculations for you.

Legal fees

A lawyer or notary will help protect your legal interests and also help you with the closing process. Legal costs will depend on the complexity of the transaction, approximately $600-$1500 + HST.

Title insurance

Mortgage lenders will recommend title insurance. For a home worth $500,000, the cost would be about $350. Consult your mortgage broker or lawyer/notary for actual costs.

Disbursements to Land Title Office

These fees are approximately $300. Your lawyer/notary will arrange this payment.

Land survey

A land survey can insure that you’re getting the property you think you are buying. Its generally required for title registration and can cost approximately $150-$400 + HST. In some municipalities, only a lawyer or notary may have access to land surveys kept at City Hall. Sometimes the previous owner will have a copy of the land survey, have your Realtor request for one.

If a surveyor is independently contracted, they can properly install property markers on the corners of the lot. With those, you will precisely know the boundaries.

Property insurance

Mortgage lenders require you to have property insurance in place. This insurance covers the cost of replacing the structure of your home and the premiums depend on the value of your home. Consult with an insurance provider for further information.

Generally, with Strata properties such as condos and townhouses, there is insurance coverage already provided as part of your monthly maintenance fees. Insure one is in place.

Its still recommended you get additional insurance as the basic coverage provided by Strata does not cover many important extras, such as upgrades or renovations, personal belongings, hotel costs and furniture moving/storage due to repairs.

Mortgage broker’s fee

If you use a mortgage broker to find a lender, you may be charged a fee when the mortgage transaction is complete. But generally in such a competitive market, brokers do not charge a fee, so you should ask your mortgage broker for clarification.

Mortgage insurance

If you have a high-ratio mortgage (under 20 per cent down payment), the government requires that it be insured against default and that you pay the cost of insurance from CMHC. The cost to you ranges from .51 to 3.25 per cent of the mortgage amount depending on your down payment amount and is added to the mortgage principal.

You will also have to pay an application fee. CMHC’s standard fee is $235 + HST. CMHC also offers a basic service for a $75 + HST fee but it must be accompanied by an appraisal.

Appraisal fee

While it’s beneficial to know how much any house your is worth in order to negotiate price, home appraisals are also required to protect the lender’s interests. Lender’s will ask for a recognized appraisal in order to complete a mortgage. Usually, the cost of an appraisal ranges from $250 to $350. However, some lenders will pay for the appraisal fees to get the business, just ask your mortgage broker.

Water testing

For properties not on a municipal water system, most – if not all – financing institutions require the water source to be tested to ensure it meets standards for human consumption. Some areas also have compounds in the water the prospective buyer may wish to know about.

NOTE: The above information should not be relied upon as complete and is subject to change. Provider of the above information not responsible for it’s accuracy. All costs are approximate.

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