Buying a home is one of the biggest financial decisions you will ever make. In British Columbia, the red hot real estate market means that this decision is even more important. Whether you are in the market for an investment property or a permanent island getaway, you will want to ensure that you understand the hidden costs that come into play.
At Jeff King Real Estate, we know that buying in the Nanaimo real estate market can mean competing offers, arranging for financing, and everything else that can make buying a home so stressful. That’s why we have prepared this guide to the common closing costs in British Columbia.
We want you to feel prepared and comfortable when you are looking for real estate in Nanaimo.
Closing Costs: Explained
Determining your budget for what type of home you want to shop around is only the first step when you are starting to look for real estate in Nanaimo. Once you have arrived on a reasonable budget and taken a look at your local listings to make sure that you are being realistic, you should start to factor in closing costs.
A safe estimate for adding closing costs to your budget is 2.5% of the purchase price. This includes costs like legal fees, property transfer tax and home inspections.
2.5% on a home purchase on Vancouver Island is nothing to turn your nose up at. $25,000 on a million dollar home is still a large expense, and you need to be prepared. Of course, some homebuyers will wonder if they can cut costs at the closing cost stage of the game. Here’s why this isn’t a good idea.
Many closing costs are required by the bank issuing the mortgage or the government, and can’t be reduced.
Other costs like property site surveys or real estate lawyer fees can be considered optional. But would you really want to gamble on the largest purchase you will make in your lifetime? This can lead to some major long term consequences – so we recommend taking closing costs seriously.
Here are the real costs of buying a home in British Columbia.
Mortgage Application Fee
A lender may charge a fee of a few hundred dollars to process your mortgage application.
Title insurance rates protect the buyer and lender from title fraud and municipal work orders, and will likely be included as a part of your legal services. This cost changes based on the value of the home, and most packages will be in the low hundreds of dollars.
This insurance must be purchased before your mortgage lender will allow funds to be released for the purchase. This protects the buyer from losses due to natural disasters like floods or fires (a very important consideration in British Columbia).
Approval for a mortgage means that it is also important to buy life, disability, or other insurance. A sudden change in health or employment can affect your income and ability to afford paying for the house so other insurance is crucial.
Once your offer has been accepted, you will need to complete your due diligence before you seal the deal. Whether the home is new or old, problems in the structure or on the property can derail that happy “new home” feeling pretty quickly. This costs roughly $500.
Your lender may require this as a condition of your mortgage. This is usually in the $200-$500 range, and is more common when buyers make a down payment of less than 25% of the home’s value.
Property Site Survey
This is an important step for any home where you plan on putting up a fence or delineating your property in another way. For a few hundred dollars, you will have confirmation of the boundaries of your property.
Land Transfer Tax
This tax is set at a 1% rate for the first $200000 of the home’s purchase price, 2% up to $2000000, and 3% on anything beyond that price. There may be other considerations to be taken, which can be reviewed on the Province of British Columbia website. With sky-high home prices becoming a reality in more BC cities, this is an important consideration.
Hiring a real estate lawyer is essential for many real estate purchases, since they will ensure you do not inadvertently miss any essential paperwork or fees. Be prepared to spend around $1500 on legal fees for buying a house in BC.
Some homes, like new builds or those that have undergone significant renovations are eligible for a GST payment. This tax will also be applied to legal fees and any other “service-based” payments listed above. Try this tax calculator to get a good idea of rates for your budget.
Property Taxes & Utilities
Depending on the property, prepaid property taxes, utilities, and even strata fees may need to be reimbursed to the seller from the closing date onward.
Preparing Yourself Costs of Buying a Home
Want to know the real costs of buying a home in the Nanaimo real estate market? Talk to a top Nanaimo realtor with experience buying and selling properties on Vancouver Island.
There’s no substitute for real experience in the area, and Jeff King Real Estate can get you on the right track for the most important purchase of your life.
Give us a call at 250.756.2112, or leave us a message asking about BC closing costs, and we will start your journey of buying a home in beautiful Nanaimo.