Understanding Closing Costs in British Columbia: What Home Buyers Need to Know

When buying a home, it is important to budget for more than just the down payment. Closing costs can range from 1.5% to 4% of the purchase price and must be paid before taking possession of the property. These are common things that some people forget to consider before the buying process begins. Understanding these costs in advance ensures a smoother home-buying experience.

What Are Closing Costs?

Closing costs are one-time fees required to finalize a real estate transaction. These costs include legal fees, taxes, insurance, and other expenses related to transferring property ownership.

Breakdown of Closing Costs in BC

1. Legal Fees & Disbursements

A real estate lawyer or notary is required to complete the transaction. Their services include:

• Title searches

• Mortgage registration

• Reviewing the contract and adjustments

Estimated cost: Starts at $1,500, depending on complexity.

2. Property Transfer Tax (PTT)

BC charges Property Transfer Tax on most real estate purchases:

• 1% on the first $200,000

• 2% on the portion between $200,000 – $2 million

• 3% on amounts over $2 million

• 5% on amounts over $3 million (on residential properties only)

Certain exemptions may apply, such as for first-time home buyers and newly built homes. A lawyer will determine whether a buyer qualifies for an exemption.

3. GST (If Applicable)

Goods and Services Tax (GST) applies to some real estate transactions in BC. Generally, GST is charged at 5% on:

• Newly built or substantially renovated homes

• Pre-sale condos or townhomes

• Commercial properties

• Short-term or vacation rental properties

• Vacant land (depending on use and seller status)

GST does not typically apply to resale residential homes, but exceptions exist. Buyers should consult a tax professional for guidance on GST obligations.

4. Mortgage Insurance (If Down Payment Is Less Than 20%)

If the down payment is under 20%, lenders require mortgage insurance to protect themselves. This is known as CMHC insurance and is added to the mortgage.

Estimated cost: Varies based on the loan-to-value ratio, ranging from 2.8% to 4% of the mortgage amount.

5. Home Insurance

Lenders require proof of home insurance before releasing mortgage funds. Coverage typically includes:

• Fire, theft, and natural disasters

• Liability protection

• Additional coverage for high-value items

Estimated cost: Starts at $1,000 per year, depending on the home and policy.

6. Home Inspection (Optional, But Recommended)

A home inspection provides buyers with an assessment of the property’s condition before completing the purchase.

Estimated cost: $500 – $800 for most homes in BC.

7. Adjustments & Miscellaneous Fees

At closing, buyers may need to reimburse the seller for prepaid expenses, such as:

• Property taxes

• Utility bills

• Strata fees (if applicable)

• Heating oil, propane, or firewood (for rural properties)

Other potential costs include:

• Moving expenses

• Utility hook-ups (electricity, gas, internet, cable)

• Immediate home repairs or furniture purchases

7. Title Insurance – Title insurance protects you and the lender against potential issues with the property’s title, such as unpaid taxes or legal disputes. This cost is usually around $200 to $400.  All lenders require this.  Your lawyer will look after purchasing this insurance for you.

How Much Should Buyers Budget for Closing Costs?

A general guideline is to set aside 1.5% to 4% of the home’s purchase price for closing costs. For example, a buyer purchasing a $700,000 home should expect to pay between $10,500 and $28,000 in closing costs.

Final Thoughts

Understanding closing costs helps buyers plan ahead and avoid unexpected financial strain. Working with a real estate lawyer ensures that all necessary fees and taxes are properly accounted for.

As a REALTOR® based in Golden, BC, I specialize in helping buyers navigate the local market and understand the true cost of homeownership in this beautiful area. If you need additional support or resources throughout your buying journey, I have a wealth of local contacts and information to help you every step of the way.

For more information on buying a home in Golden, BC, reach out today to discuss your home-buying plan.