7 Closing Costs You Need To Budget For

Mortgage Brent Shepheard 2 Apr

7 Closing Costs You Need To Budget For


What are closing costs?

Closing costs are an often overlooked expense in the home buying process, especially among first-time home buyers.   Closing costs are in addition to your down-payment funds.  Most lenders use a standard calculation of 1.5% of the purchase price to determine the closing costs needed to satisfy their funding requirements.

For example, if you purchase a property for $675,000, be prepared to show $10,125 (1.5% x $675,000) of liquid funds available in addition to any down-payment funds.

Let’s take a look at 7 Common Closing Costs you need to budget for:


Lenders will require that you have an active homeowner and fire insurance policy in place prior to funding.    Your Lawyer or Notary will verify your insurance as part of your closing process.  The amount to be insured is typically the mortgage amount of the full replacement cost of the home.  These costs vary and you are free to shop for the best deal.  If you are buying a strata property, your strata will have active insurance in place.



The appraisal is for the benefit of the lender and the home inspection is for the benefit of the home buyer.   An appraisal is required when the lender needs to determine the current market value of a property.  The appraisal fee is the responsibility of the borrower and forms part of your closing costs.  A home inspection is more common when buying a detached home in comparison to strata properties.   The inspection is optional but always advised.  A good home inspector will find issues with the property that can be brought to the seller’s attention when negotiating a sale.



In British Columbia, every time a property changes owners, it is taxed under the Property Transfer Tax (PTT)  The tax is paid for by the buyer and is usually the largest expense in closing.   If you are a first-time homebuyer, you may qualify for an exemption from the PPT.  Click here to see if you qualify for an exemption.   As of April 2nd, 2022 the PTT is calculated as:

  • 1% of the fair market value up to and including $200,000
  • 2% of the fair market value between $200,001 – $2,000,000
  • 3% of the fair market value above $2,000,001
  • an additional 2% tax on the fair market values above $3,000,000



You are entering into a legally binding agreement with your mortgage lender.  It is required that you have your own legal representative act on your behalf in this transaction.  You can use a Notary or Real Estate Lawyer and they will charge anywhere between $750 – $2,000 for a standard purchase transaction.  Fees will vary so feel free to get a few quotes or ask me for a referral.



The ownership of a property is legally referred to as title.  Title insurance is a legal form of assurance as to the state of a property’s title.  It protects the lenders and purchasers against any loss or damage suffered due to fraud, survey mistakes, encroachment issues, existing undisclosed liens, or any other issue that would prevent an owner from having clear ownership of the property.  Your Notary or Lawyer will ensure you have title insurance and it costs around $250.



The buyer may need to pay the seller for any prepaid property expenses such as property taxes, utility bills, or strata fees.   For example, if you take possession of a property in August and the current owner paid the property taxes for the year, an adjustment is required.  The amount will be determined by your Lawyer or Notary using a pro-rated daily rate.  Adjustments are listed in detail in your Statement of Adjustments prepared by your Lawyer or Notary.



GST is paid only on new construction purchases (pre-builds, new homes etc.).  The GST is 5% of the purchase price and can be added to your mortgage balance.

For example, if you purchase a newly built condo for $529,900 you need to pay $26,495 (5%) in GST.  This makes the total purchase price of the condo $556,395.



If you have any questions, contact Brent today or book a call-back time here.

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