Costs of Buying a Home in BC

Everybody knows that you need a downpayment and a mortgage to buy a house in BC, assuming you aren’t paying cash. But what other costs are there in buying a home? This is a common question that we get asked all the time.

Knowing the costs of buying is important because you will need to set enough aside to cover closing costs in order to complete the sale of your home. Figuring out the costs beforehand will ensure you not only have enough to buy the home, but you will also have enough left over as a safety net afterwards.

So, to make sure you are not scrambling to come up with extra funds on closing day, here are the costs associated with buying a home in BC.

During The Sale

Home Inspection ($400 - $600)

More than likely you’lll want to get a home inspection. We advise every client to hire a qualified home inspector to inspect the property before purchasing a property to make sure there are no surprises. Home inspection costs vary depending on the type and size of property but typically run between $400 to $600 for an average-sized home. Condos will be on the lower end and larger homes with detached outbuildings (garages, carriage suites, etc) will be on the higher end.

WETT Inspection ($100 - $300)

If the home has a wood burning fireplace then your insurance provider will most likely want a WETT certification to show that the fireplace was installed correctly. Some home inspectors can also do a WETT inspection and will offer a discount if done with a regular inspection. Typical cost is $100 to $300.

Appraisal ($300 - $500)

An appraisal is often ordered by a lender as a condition of loan approval. The bank or lender then charges the cost to the buyer and often adds it into their loan amount. This is typically done when more than 20% is put down or when other factors trigger them to order an appraisal, such as market conditions or offering much higher than list price. Appraisals usually cost $300 to $500.

Deposit (2% - 10% of the purchase price)

A deposit is a good faith token that a purchaser makes to show that they are serious about buying the home. This is separate from your down payment, but it can form part of your down payment on closing. The higher the deposit, the stronger the offer. The deposit is typically paid either on acceptance of an offer, or when all the conditions of the offer have been met. It is paid into a trust account on behalf of both the purchaser and the seller. Once the sale is finalized the deposit is applied to the purchase price. It can form all or part of the down payment. The purchaser will pay the remaining amount either by cash or through a mortgage. Deposits are negotiable although 5% is common in a competitive market it is not uncommon to see higher amounts.

Costs Due On Closing

Property Transfer Tax (PTT)

Most trades in real estate in BC will be subject to a Property Transfer Tax, with a few exceptions. This is a provincial tax charged when you purchase or gain an interest in property that is registered at the Land Title Office. Some exemptions include sales on new homes, transfers between family members on certain occasions, and sales on native reserve land.

PTT is calculated on the fair market value (ie. sale price) as follows:

1% on the first $200,000

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

3% on the portion over $2,000,000

If you are a first-time home buyer you may qualify for a full or partial exemption on PTT through the First-Time Home Buyers’ Program as long as the purchase price is $525,000 or less (https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers)

GST

New home builds and substantially renovated homes (90% renovated) are subject to GST, unless the GST is prepaid by the seller/developer. If a property is being used for business purposes or short term rentals then GST may also be applicable. Vacant land and vacation properties are usually subject to GST as well. As a rule of thumb, the purchaser typically pays GST on new home builds and the seller typically pays GST due to their business operations. It is important to have this specifically outlined in the purchase and sale contract or the purchaser may be liable for any GST payable. For new homes you may qualify for a New Housing Rebate of up to 36% of the GST on homes valued up to $350,000 and a partial rebate for homes valued between $350,000 and $450,000 (https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4028/gst-hst-new-housing-rebate.html)

There is also a similar GST rebate available for rental properties under the New Residential Rental Property Rebate (https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4231/gst-hst-new-residential-rental-property-rebate.html)

Lawyer Fees ($2,000 - $2,500)

Lawyer fees are subject to a number of things but they are usually between $2,000 to $2,500 for a typical transaction on the purchaser’s side. The seller will have their own lawyer as well. Once you have an accepted offer and conditions removed you will need a lawyer to complete the transaction and register your ownership at the Land Titles Office. They will do checks to make sure you have clean and clear title without charges or claims against it.

Title Insurance ($250 - $400)

Often in lieu of having a survey or real property report you may get title insurance on the property. Sometimes title insurance is a good thing to have anyway. It is an insurance policy that covers you in the case of unforeseen defects in your title ownership, such as previous unpaid property taxes or if an outbuilding encroaches onto a neighbours property and has to be moved/removed.

Survey (optional)

Sometimes a purchaser may want a new survey if they are planning on adding a new structure to the land and want to know exactly where the boundaries are. In most other cases it is not necessary as the city will provide lot outlines and combined with title insurance you can be very well protected.

CMHC Premium (0.6% - 6.3% of the purchase price)

A mortgage with less than 20% down is called a high-ratio mortgage. When banks lend on a high ratio mortgage they will require mortgage insurance through either CMHC or one of the other mortgage insurers. This is actually an insurance policy for the bank in case the borrower defaults on their loan and the lender cannot reclaim its losses. This usually happens if they foreclose the property and it is worth less than what is owed. The insurance policy will ensure they get their investment back. This policy premium is paid for by the borrower and added into the mortgage amount. The amount of the premium depends on the amount of the down payment. Premium rates can be found on the CMHC website (https://www.cmhc-schl.gc.ca/en/consumers/home-buying/mortgage-loan-insurance-for-consumers/cmhc-mortgage-loan-insurance-cost)

Home / Fire Insurance

If you’re getting financing the lender will most likely require that you get home and fire insurance on the property. Even without financing it is still a good idea to have home insurance. Rates may vary based on location and history.

Balance Of Purchase Price

This is not really an added cost but on the closing date you will need to come up with the remaining balance owing after the down payment and deposit. This is typically done through a mortgage unless it is a cash deal.

Property Tax Adjustment

On the day of closing your lawyer will adjust the property taxes based on when the taxes were paid and when the deal closes. Property taxes in Kelowna are due on July 2. This payment covers the entire current year so if a home is purchased after July 2 then the previous owner would have prepaid the taxes for the current year already and is entitled to get the portion back for the remainder of the year. In simple terms, if you purchase a property on October 31, then you would have to reimburse the seller for the remaining 2 months worth of property taxes. If you move before the property taxes are paid then the seller would have to pay back their portion of property taxes for that year. For example, if the possession date is February 1 then the seller would have to pay you for the 2 months they lived in the property then you would use that money to put towards your property tax bill on July 2 when it becomes due.

Other Closing Adjustments

Just like property taxes there may be other items that have to be adjusted such as prepaid utilities, strata fees or any other items that the seller may have paid for upfront.

Taxes

Property Tax

After the property tax adjustment on closing day the new purchaser is required to continue making yearly property tax payments. Property tax is typically calculated based on the home's municipal assessment value, which can be found at BC Assessments online. The property tax is then calculated by dividing your assessed property value by 1,000 and multiplying that number by the mil rate. The mil rate is different for each municipality and can be found on the city’s website.

Water Tax (metered water)

Water is metered in many areas in the Okanagan and charged per usage. Your city’s website will have information on base rates and metered rates.

Sewer Tax / Levy

Your property tax will also have a sewer tax built into it. Sometimes there may be a sewer levy to cover costs of recent upgrades in a specific neighbourhood. It is important to check for this before purchasing a property so you don’t get a surprise bill in the mail.

Foreign Buyer Tax

Recently the provincial government introduced a tax on foreign ownership of property in BC. The purpose of this tax was to slow down the amount of foreign investment in Canadian property that was inflating the price of homes in BC. If you are a Canadian citizen you will not have to worry about this tax. This tax is a one-time tax due on closing in the amount of 20% of the purchase price. The tax is applicable only to certain areas of BC (Central Okanagan being one of them). More information on the Foreign Buyer Tax can be found here: https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/additional-property-transfer-tax

Speculation and Vacancy Tax

In order to increase affordability and create more housing opportunities the provincial government created a Speculation and Vacancy Tax. 99% of residents in BC are exempt from this tax. The taxable areas for this tax include specific areas in BC including Kelowna and West Kelowna. Areas in the Okanagan outside the city boundaries of Kelowna and West Kelowna are exempt as of the time of this writing. For example, Lake Country, Peachland, Vernon, etc. are all exempt. The tax rate could be anywhere from 0.5% to 2% based on certain conditions. More information on the Speculation and Vacancy Tax can be found here: https://www2.gov.bc.ca/gov/content/taxes/speculation-vacancy-tax 

Other Considerations

Strata Fees

The words “condo” and “strata” are pretty much synonymous in BC. So, when you hear someone say “strata fees” they are talking about condo fees. But there are many different types of strata in BC. There is the typical condo style strata as well as townhome and bare land strata. Often you will find single family homes set up as a bare land strata with minimal strata fees and even 45+ and 55+ age restriction communities with strata fees that cover various amenities. If a property is registered as a strata then you will be able to find the strata fees on the Form B provided by the strata council of that particular strata.

Strata Special Levies

In rare circumstances the strata may have a special levy to cover unexpected expenses. A strata will have a contingency fund for repairs and maintenance as well as a yearly budget for operating expenses. Sometimes an unexpected emergency repair requires the strata council to issue a special levy. This levy is paid by each owner usually based on the schedule of unit entitlement in the strata plan or by some other method determined by the strata council.

Strata Move-In Fee ($100 - $300)

Many stratas have a move-in fee. While this fee may vary, it is common to see about $200 as a one-time strata move-in fee.

Mobile Home Pad Rental ($400 - $600 per month)

Mobile and modular homes are typically on leasehold land, meaning you don’t own the land and your lot is rented from the mobile home park directly. It is fairly common to see pad rentals of around $550 per month in Central Okanagan. If you are getting financing keep in mind that since you do not own the land your lender may require 20% down on mobile and modular homes.

Land Lease

In BC there are two types of land ownership - freehold and leasehold. Freehold land means you own the land. Leasehold means you are leasing the land from the freehold owner. There are many leasehold setups and payment structures. There are prepaid leases, where the person leasing the land has paid the entirety of the funds up front and there are leaseholds where you pay monthly. Leaseholds in real estate tend to be much longer than what you would see in a landlord/tenant lease of a residential property. It is not uncommon to see leaseholds with 50 - 99 year leases. Quite often with leasehold land a lender may require 20% as a down payment. Things to check into with leasehold land is if it is prepaid, whether there are any monthly payments, the terms of the lease, the renewal terms of the lease, how many years are left on the lease, and if the lease is CMHC approved. Always consult a lawyer to review the lease agreements on these properties.

Leased Items

Some items that convey with the property may be leased, such as a home security system or solar panels. These items should be explicitly addressed in the Contract of Purchase and Sale and it should be stated whether the seller is going to pay out the contract or if the purchaser is going to assume the monthly instalment payments.

Moving Expenses

Don’t forget to have enough money put aside for your moving expenses. This could be travel expenses if you’re moving from one city to another, movers/moving companies, hotels, etc.

Utility Connections

Some utilities may require a deposit or connection fee. It’s a good idea to call and arrange for gas, electricity, phone, cable, internet, and any other utilities ahead of time. While you are on the line with them, ask if there are any setup fees or deposits required.