A Buyer’s Guide to New Home Closing Costs

One common mistake many people make when buying a new home is not budgeting for the appropriate closing costs. Understanding these fees well ahead of time can help you be better prepared for the process and avoid disappointment down the line. 

To help you get started, here is a complete guide on typical new home closing costs you can expect in British Columbia. 

Property Transfer Tax

When buying a new home, you will likely come across the term “property transfer tax” or PTT for short. How much PTT you pay will greatly depend on the type of purchase you are making. We’ve covered these different scenarios in more detail below to help you know what to expect. 

Resale Housing 

When you purchase a property that falls under the umbrella of resale housing, PTT will be applied. Resale housing, by definition, is a residential property that has already been lived in and is being sold as-is. The way this is calculated is: 

• 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
• Finally, a further 2% tax will be applied on the fair market value greater than $3,000,000.

To help all of this make more sense, you can see a calculation example here.

Note that these calculations are for a property that is 100% residential and that does not have any commercial use. If you were purchasing a residential and commercial property, this would be calculated differently. To learn more about this, you can visit the B.C. government website. 

Another important thing to keep in mind for resale housing and PTT is that you could be exempt under the First-Time Home Buyers Program if: 

• The fair market value of the residence is $500,000 or less
• It is your primary residence
• The property is 0.5 hectares (1.24 acres) or smaller

New Construction 

If you buy a new construction build, there is no PTT payable up to $750,000 in value. To qualify, you (the buyer) must be an individual, a Canadian Citizen or Permanent Resident, and located in British Columbia. 

The property must also be your principal residence and 0.5 hectares (1.24 acres) or smaller. If the value of your home is just shy of this amount, there is a partial exemption for homes between $750,000 and $800,000.

Property Transfer Tax for Non-Residents 

An additional property transfer tax applies to residential property transfers to non-residents in the Greater Vancouver Regional District. If this is the case for you, an additional 20% of the fair market value of your proportionate share of a residential property is due upon closing.

Note that there will be a ban for foreign nationals from buying homes starting January 2023 and as of now, will last two years. Exemptions will be in place for permanent residents and temporary residents, including temporary workers and international students, so be sure that you have the appropriate residency status before starting your search.

2. GST

In British Columbia, you are required to pay GST on your new home, which is 5% on top of the fair market value. This is in two specific scenarios: 

New Construction

A brand new home will always be subject to GST. However, depending on your purchase price, you might be eligible for a rebate. You can learn more about that here. 

Heavily renovated homes

The rule of thumb here is that if 90% or more of the home has been renovated, you will be subject to GST. You can make your realtor aware of whether you want to avoid this while searching for a new home.

3. Mortgage Insurance and Fees

If you obtain a high-ratio mortgage (a mortgage where you pay less than a 20% down payment) you will have to buy mortgage loan insurance from CMHC or a private company.

The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on the size of your down payment. 

What’s important to know here is that the higher the percentage of the total house price/value that you borrow, the higher percentage you will pay in insurance premiums. 

The insurance premium usually gets added to your mortgage, so make sure you discuss this with your mortgage broker ahead of time so you know what fees to expect.

4. Appraisal and Survey

Before your lender approves your mortgage, you may be required to have an appraisal done. Sometimes your lender will waive this cost, otherwise, it will be your responsibility. The fee ranges from $350 to $450, but you can confirm this price before you go ahead. 

5. Home Inspection Fee

As part of the conditions in your offer, you might decide to have a home inspection carried out on the property to make sure it’s in good shape. 

Most realtors recommend that you get a home inspection by a certified home inspector, which can cost you from $450 to $750 for a smaller house and can go up from there for a larger home. 

Your realtor will already have the name of a trusted home inspector ready, so make sure to check in with them before doing your research. 

6. Legal Fees

Once you have an accepted offer and the subjects are lifted, this is where you will start the legal process of transferring the property to you in time for the official possession date.

You should have the name of a good lawyer in mind beforehand, as notable legal offices that handle this type of work can be very booked up. 

In terms of the cost, lawyer/notary fees for closing the sale depend on the complexity of the deal but they should range from $1,800 – $2,200. Disbursements to the Land Titles Office are approximately $500. 

Are you thinking of buying a new home?

Understanding just how much you are going to pay for closing costs can sometimes be overwhelming and as straightforward as one would think. That’s why having a trusted realtor by your side can make all the difference.  

If you are starting your search for a new home, you are invited to contact Michele Laurent. 

 She will spend time getting to know what your perfect home looks like so she can give you a more accurate idea of the closing costs you might pay. 

To get in touch, email Michele at info@michelelaurent.ca or call her at 604-312-1266.

Meet Michele