Buyers - Closing Costs: What to Expect

Congratulations! You've found the right home, your offer has been accepted, and your financing is in place. Before you receive the keys, there's one final step to prepare for: closing costs.

Many buyers focus on saving for their down payment but are surprised to learn there are additional expenses due when the purchase is completed. Understanding these costs ahead of time will help you budget with confidence and avoid any last-minute surprises.

In British Columbia, ownership officially transfers from the seller to the buyer on the completion date. On that day, your lawyer or notary registers the property in your name, arranges the transfer of funds, and ensures all legal requirements have been met.

While the exact amount you'll pay depends on the purchase price, property type, and your individual circumstances, the following are the most common closing costs for home buyers in Greater Victoria and throughout Vancouver Island.

Property Transfer Tax (PTT)

Property Transfer Tax is a provincial tax that most buyers pay when purchasing a home in British Columbia. The tax is generally calculated as:

• 1% on the first $200,000

• 2% on the portion between $200,000 and $2,000,000

• 3% on the portion above $2,000,000

Some buyers, including eligible first-time home buyers and purchasers of qualifying newly built homes, may qualify for a full or partial exemption.

Legal or Notary Fees

A lawyer or notary plays an important role in the closing process. They conduct the title search, prepare all legal documents, register the transfer of ownership, arrange mortgage registration, and coordinate the exchange of funds.

These professional fees, along with any disbursements, are paid at closing.

Mortgage Default Insurance

If your down payment is less than 20%, your lender will require mortgage default insurance through CMHC, Sagen, or Canada Guaranty.

Although the insurance premium is usually added to your mortgage, the applicable provincial sales tax must be paid at closing.

Appraisal Fee

Some lenders require an independent appraisal to confirm the property's market value before finalizing your mortgage.

Depending on the lender and mortgage program, this cost may be covered by the lender or paid by the buyer.

Home Inspection

While not mandatory, a professional home inspection is one of the best investments you can make. It provides valuable insight into the home's condition and may identify issues before you complete the purchase.

Inspection fees are typically paid when the inspection takes place.

Title Insurance

Title insurance is an optional policy that protects both you and your lender against certain title defects, survey issues, fraud, and other unexpected legal problems. Many lawyers and notaries recommend purchasing this coverage for added peace of mind.

GST on New Homes

Most resale homes are exempt from GST.

However, newly constructed homes are generally subject to 5% GST. Depending on the purchase price and your eligibility, you may qualify for a GST rebate, so it's important to confirm the details before writing your offer.

Property Tax and Utility Adjustments

On the completion date, your lawyer or notary will adjust property taxes and certain prepaid expenses so that both the buyer and seller pay only their fair share for the time they own the property during the year.

Depending on the timing of your purchase, this adjustment may result in either a credit or an additional amount payable.

Home Insurance

Before your mortgage funds can be released, your lender will require proof that home insurance is in place effective on the completion date.

Arranging your insurance well in advance helps ensure a smooth closing.

Budgeting for Closing Costs

Every home purchase is unique, so your closing costs will vary depending on the property and your personal circumstances. As a general guideline, it's wise to budget approximately 1.5% to 4% of the purchase price to cover these one-time expenses.

Planning ahead will help ensure you're fully prepared when it's time to complete your purchase.

The good news is that I'm here to guide you through every step of the buying process. I'll help you understand what costs to expect and connect you with trusted local mortgage professionals, lawyers, and notaries to make your closing as smooth as possible.

The information above is intended as a general guide. Closing costs, tax rates, and buyer incentives can change over time. Buyers should confirm current fees, taxes, and eligibility for exemptions with their lawyer, notary, mortgage professional, or the appropriate government authority.