Guide to Buyer's Expenditures
These are some of the costs a buyer should be aware of:
Property Purchase Tax
This is payable to the Provincial Government on the purchase of all real property in British Columbia. It is calculated as 1% of the purchase price up to $200,000 and 2% of any amount above $200,000.
First time buyers are exempt from paying the property purchase tax under the following conditions:
- Purchase price is $275,000 or less (in lower mainland)
- Mortgage loan to value ratio is 70% or higher
- Mortgage term must be for 1 year or longer
- Mortgages must be arms length - mortgages held by parents do not qualify
- The maximum amount available for the principal buydown of the mortgage is $11,000
- Buyers must not have owned a home anywhere in the world before
- Buyers must be a resident of B.C. for at least 1 year
- Buyers must reside in the home for at least 1 year after completion
- Exemption applies only on residential properties up to 1.24 acres
Building Inspection
It is recommended that a buyer hire a registered building inspector to evaluate the condition of the home. Approximate cost: $200.00
Survey
Generally, a bank or trust company will require a survey to confirm that a house does not encroach or cross over the property line. A seller will sometimes have a survey already, especially if the seller had a mortgage on the property. If not, a new survey on a house will cost approximately $200.00. Surveys are not necessary if the buyer is buying a strata property or condominium or if the buyer will have more than 50% equity in the house.
Legal Fees
This will be the amount of legal fees paid to the buyer's lawyer or notary public. The amount of legal fees will vary and it is not necessarily the case that a notary public will charge lesser fees than a lawyer. A buyer should realize that there are differences between the services that a lawyer will offer when compared to a notary public. A notary public cannot give legal advice; therefore we recommend you use a lawyer. Legal advice would include explaining registrations on Title (i.e. restrictive covenants, rights of way, etc.), the effect of a mortgage, the consequences of a default on the mortgage and a buyer's options if a seller decides to back out of a Contract of Purchase and Sale. This is why we recommend a lawyer over a notary public. The degree of risk one is prepared to assume and the level of service required would determine your choice.
Transfer Filing Fee
This is a charge of $50.00 paid to the Land Title Office to register the property into the tire buyer's name.
Mortgage Filing Fee
This is a charge of $50.00 paid to the Land Title Office to register each mortgage that will be registered against tire title of the property.
Insurance Binder
This is a requirement by the bank or trust company to ensure that the buyer has arranged fire insurance on the new home. Proof of insurance coverage by way of an insurance binder is necessary and the typical cost will range up to $35.00.
Form A Certificate
This is required only when a strata property or condominium is purchased. The certificate is issued by the strata corporation in order to confirm that the previous owner does not owe the strata corporation any money. This certificate will range in price up to approximately $40.00.
Adjustments
These are prepaid expenses which will need to be prorated between the Seller and the Buyer. For example, a typical adjustment would be the property taxes paid to the city or municipality. The amount paid will be adjusted as of the adjustment date and one party will be required to reimburse the other. Other typical adjustments include strata maintenance fees and utility expenses.
Disbursements
This refers to any out of pocket expenses incurred by the lawyer or notary public on behalf of the buyer. It will include various Land Title searches, tax searches, courier costs, photocopies, postage, filing agent fees, long distance telephone calls, etc.
(these costs vary and your lawyer or notary public will tell you how much it is)
Goods and Services Tax
GST of 7% is payable to the Federal Government only on the purchase of any new home or a home that has been substantially renovated. A buyer may be entitled to a GST rebate of 36% of the 7% tax if the buyer or a relation of the buyer will be moving into the new home and making the home his or her permanent residence. The full GST rebate is available only on residential homes priced at $350,000 or less. The buyer of a new or a substantially renovated home priced between $350,000 and $450,000 may be entitled to a gradually reduced rebate that is determined by the purchase price. Buyers of new or substantially renovated homes priced at $450,000 or more are not eligible for the rebate.
This information is being provided to assist in the planning of a home purchase. It is not intended to be legal advice and the information set out may not be applicable in all cases. Each client will be different and it is recommended that the buyer(s) consult with their lawyer or notary public as early as possible to confirm the actual cash requirements necessary to buy a home.