How much does it cost to buy a property?
The purchase price is not the only cost when buying a property. In addition to the costs of moving, hook-ups or deposits related to utilities, phone, cable, ect…, a buyer should always know to prepare for closing costs. Closing costs, with estimated amounts, normally include the following, though some may not always apply:
- Property Transfer Tax: unless you have an exemption, this tax is payable by the buyer at the time of registration and will equal 1% of the first $200,000 of purchase price ($2000) and 2% of any amount above that.
- Legal Fees: If using our office, buyers should estimate between $800 (cash deal) to $1325 (purchase with a mortgage) on property at $600,000 or less. Costs increase marginally when the purchase price is above $500,000.
- Property Tax Adjustment: the buyer and seller will have to work out the adjustment on taxes. If purchasing after mid-June, the buyer should budget to pay the seller for the days in which the buyer will own the property in a calendar year. To determine the amount, take the tax amount paid and multiply it by the number of calendar days in the year from the completion date to Dec. 31st then divide it by 365 and you’ll get the number the buyer will have to pay. When buying before mid-June, the buyer will receive a credit from the seller, but the buyer should budget to ensure they have the tax amount available when taxes come due in early July.
- Title Insurance: lenders increasingly are requiring this as part of a financing package, and the buyer must pay the cost to obtain a lender policy. Budget between $100-175.
- Strata Costs: if buying in a strata development, there will be costs associated with obtaining the strata forms the Land Title Office requires on completion – normally between $50-150 unless required on an expedited basis. On top of that, the buyer will owe the seller for part of the monthly strata payment. To determine the amount, take the amount of the monthly strata payment and multiply it by the number of days in the month the buyer will be the owner of the property, then divide by the total number of days in the month. Strata corporations also like to collect a move-in fee from the buyer, normally around $50-200, which is payable on closing.
- Utility Adjustments: depending on the area in which you purchase, there will likely be annual and/or quarterly adjustments for utilities and/or water districts. These normally aren’t too much, but you should budget about $200 just to be safe.
- Fees Associated with Borrowing: There are other costs associated with buying that may be built in to mortgage such as lender fees, commitment fees, broker fees, CMHC fees, ect… but these are not normally paid by the buyer on closing. These fees are included in the mortgage and we receive the net mortgage proceeds after the lender or lender’s lawyer takes these fees off the gross mortgage amount.
You should discuss with your broker or lender whether you are responsible for fees such as these as it may affect the net amount of mortgage money you receive, meaning you may be required to bring in more closing funds than you have budgeted.