Closing Costs

TAXES

Taxes can be a very large part of the costs associated with buying real estate, especially with newly built homes.  Two of the different type of taxes associated with the purchase of real estate are - Goods and Service Tax (HST) and Property Transfer Tax (PPTT).

The PPTT is imposes by the B.C. Government on all purchases of real estate property in the province at the rate of 1% of the first $200,000.00 and 2% of the balance of the purchase price.  The tax must be submitted to the government at the time you buy the property.

First Time Home Buyers can be exempt from the tax under certain circumstances if they meet all the requirements.  The main ones are that they must be a Canadian citizen or permanent resident of Canada, who have resided in B.C. for at least 12 months.  It is also necessary that they have never owned a principal residence anywhere else before.  The other main conditions are that the house be valued at less than $275,000.00 in the Vancouver Lower Mainland and that the purchases has financed at least 70% of the fair market value (not including monies borrowed from related individuals) for at least one year.  The mortgage balance during the first year must be reduced by no more than $11,000. 00.

HST is payable on all new or substantially renovated homes by the first occupier of the property.  HST is charged at the rate of 7% and depending on how the contract is prepared it may be included in the purchase price.

If the contract is silent on HST, the purchaser is responsible for it.  Rebates are available for up to 35% of the HST if the purchaser is going to use the property as a primary residence.  The rebate may be assigned (signed over) to the vendor and can be credited towards the purchase price.

The forms necessary to claim exemptions of rebates or to submit taxes will normally be prepared for you by your solicitor.

SURVEY CERTIFICATE

Most mortgage lenders will insist on a survey certificate.  The cost is usually between $250.00 - $300.00 and is generally paid by the purchaser.  The survey certificate is used by the lender to ensure that the building on your property does not encroach on adjoining properties or offend local by-laws.  Infractions could reduce the value of the lender's security.  If your neighbor can force you to remove your garage (and the lender's security) the lender wants to know about it in advance.  Knowing about these possibilities in advance can help you decide if you really want to buy a specific property.

If possible, purchasers should insist that the vendor provide a survey certificate as part of the negotiated obligations of the vendor.  Most vendors with mortgages on their property will have been required to have provided their bank with a survey when they purchase.  If you can secure an old survey, most lenders are satisfied with an affidavit stating there have been no additions or alterations to the property.