Buying a home is a significant financial commitment, and potential buyers often focus on the purchase price without considering the various additional costs involved. In British Columbia, several expenses can catch buyers off guard during the home-buying process. This article aims to shed light on the buyer's costs associated with purchasing a home in BC, helping prospective homeowners make informed decisions.
- Property Transfer Tax:
One of the unavoidable costs for homebuyers in BC is the Property Transfer Tax (PTT).
~1% of the fair market value up to and including $200,000
~2% of the fair market value greater than $200,000 and up to and including $2,000,000
~3% of the fair market value greater than $2,000,000.
~If the property has residential property worth over $3,000,000, a further 2% tax will be applied to the residential property value greater than $3,000,000.
First-time homebuyers may be eligible for exemptions or partial exemptions with certain requirements, easing the burden for those entering the housing market for the first time. Click Link to Read Full Article
The newly built home exemption reduces or eliminates the amount of property transfer tax with certain requirements. Click Link to Read Full Article
2. Bank Appraisal Cost:
Before approving a mortgage, financial institutions often require a professional appraisal of the property to determine its value. While some banks or mortgage brokers may waive this fee as an incentive, buyers should be prepared for potential out-of-pocket expenses.
3. Property Taxes:
Property taxes are an ongoing expense, but buyers should also consider the adjustment for property taxes at the closing time. The lawyer handling the transaction will adjust the buyer's portion of property taxes, ensuring a fair distribution between the buyer and the seller.
4. Strata Fees:
For properties within strata developments, buyers need to factor in the monthly strata fees. At the time of purchase, this cost will typically include the fees for the current month. Strata fees contribute to the maintenance and management of shared amenities and common areas.
5. GST:
Goods and Services Tax (GST) may apply to the purchase price, particularly for newly constructed homes, commercial transactions, short term rental properties, and agricultural land. Buyers should be aware of the GST implications and factor this into their budget. Certain rebates may be available, especially for primary residences.
6. Inspection Cost:
A home inspection is a crucial step in the home-buying process to identify any potential issues with the property. While the cost of a home inspection varies, it is a wise investment that can save buyers from unexpected repair expenses down the line.
7. Home Insurance:
Securing home insurance is a requirement for mortgage approval. Buyers should budget for the first year of home insurance premiums, considering factors such as coverage limits, deductibles, and the property's location.
8. Lawyer's Fee:
Legal representation is essential during the home-buying process, and lawyers charge fees for their services. These fees cover various aspects, including document review, title transfer, and ensuring the transaction complies with legal requirements.
9. Title Insurance:
While optional, title insurance provides an added layer of protection against potential issues with the property's title. It helps safeguard buyers from undisclosed liens, encroachments, and other title-related problems. Some lenders will require a Buyer to obtain title insurance.
10. CMHC insurance:
Canada Mortgage and Housing Corporation (CMHC) insurance is a type of mortgage insurance that protects lenders in the event that a borrower defaults on their mortgage payments. CMHC insurance is typically required when a homebuyer has a down payment of less than 20% of the purchase price.
Understanding the full scope of buyer's costs when purchasing a home in BC is crucial for financial planning and avoiding surprises. By factoring in these expenses, prospective homeowners can navigate the real estate market with confidence and make informed decisions that align with their budget and financial goals.
JP Letnick PREC
JP Letnick - Central Okanagan Realtor®
