Closing costs on a home in BC: What you need to know
Purchasing a home is a significant financial investment, and there are various closing costs that you will need to consider. These costs are in addition to the purchase price of the home and can include fees for legal services, property transfer tax, and other expenses.
In British Columbia, the property transfer tax is a tax that is levied on the transfer of ownership of real estate. The tax is based on the value of the property, and the rate increases as the value of the property increases.
To calculate the property transfer tax, you will need to know the value of the property and the applicable tax rate. The value of the property is generally the fair market value of the property, which is the price that a willing buyer would pay to a willing seller. The tax rate is based on the value of the property, as follows:
- For properties valued at $200,000 or less, the tax rate is 1%.
- For properties valued between $200,000 and $2,000,000, the tax rate is 2% on the portion of the value that is greater than $200,000.
- For properties valued at more than $2,000,000, the tax rate is 3% on the portion of the value that is greater than $2,000,000.
For example, if you are purchasing a home valued at $500,000, the property transfer tax would be calculated as follows:
$200,000 x 1% = $2,000 ($500,000 – $200,000) x 2% = $6,000
Total property transfer tax = $8,000
First-time homebuyers in BC may be eligible for a property transfer tax exemption. To qualify for the exemption, you must meet the following criteria:
- You must be a Canadian citizen or permanent resident.
- You must have never owned an interest in a principal residence anywhere in the world.
- You must have lived in BC for at least 12 consecutive months immediately before the date you register the transfer.
- You must occupy the home as your principal residence within 92 days of the date of registration.
If you meet these criteria, you may be eligible for a full exemption of the property transfer tax. If you are purchasing a home with someone who is not a first-time homebuyer, the exemption may be partial.
In addition to the property transfer tax, there are other closing costs that you will need to consider when purchasing a home in BC. These can include legal fees, appraisals, and inspections. It’s important to budget for these costs and to shop around for the best prices.
Overall, it’s important to be aware of the closing costs associated with purchasing a home in BC and to budget accordingly. The property transfer tax exemption for first-time homebuyers can be a helpful way to save on these costs, so be sure to check if you are eligible.