24 Feb How to Minimize Closing Costs When Buying a Home in BC

Buying a home in British Columbia, especially in cities like Surrey, Abbotsford, and Langley, is a significant financial commitment. While most buyers focus on saving for a down payment, many overlook closing costs, which can add up to thousands of dollars.

Closing costs in BC generally range between 3% to 5% of the home’s purchase price and include fees such as land transfer tax, legal fees, appraisal fees, home inspection fees, and mortgage insurance premiums. These expenses can be overwhelming, especially for first-time home buyers, but there are strategic ways to reduce these costs and save thousands.

This guide provides a detailed breakdown of closing costs and practical strategies to minimize them, helping you make your home purchase in BC more affordable.

1. Understanding Closing Costs in British Columbia

Before learning how to reduce closing costs, it’s crucial to understand what these costs include. Below is a breakdown of the key closing costs you’ll encounter when purchasing a home in BC.

A. Property Transfer Tax (PTT) – The Biggest Closing Cost

The Property Transfer Tax (PTT) is one of the largest upfront costs in BC. It is a provincial tax calculated based on the purchase price of the property:

• 1% on the first $200,000 of the home’s purchase price
• 2% on the portion between $200,000 and $2,000,000
• 3% on the portion above $2,000,000

For instance, if you purchase a $800,000 home in Surrey, your PTT would be:

• 1% of $200,000 = $2,000
• 2% of $600,000 = $12,000
• Total PTT = $14,000

However, first-time home buyers may qualify for a PTT exemption, which can save them up to $8,000 (details covered later).

B. Mortgage Default Insurance (CMHC Premiums)

If your down payment is less than 20%, you are required to pay mortgage default insurance (also called CMHC insurance). This insurance protects lenders in case of mortgage default and is calculated as a percentage of your mortgage amount:

• 5% down payment → 4.00% of mortgage
• 10% down payment → 3.10% of mortgage
• 15% down payment → 2.80% of mortgage

For example, if you buy a $700,000 home in Abbotsford with a 5% down payment ($35,000), your mortgage default insurance would be:

• 4% of $665,000 (loan amount) = $26,600

Ways to minimize CMHC costs:
✅ Increase your down payment to 10% or more to lower the premium
✅ Consider lender-specific mortgage insurance alternatives
✅ Work with a mortgage broker to find lenders offering lower insurance premiums

C. Legal Fees & Title Registration Costs

When buying a home, you’ll need to hire a real estate lawyer or notary to complete the transaction, which includes:

• Title registration
• Mortgage documentation review
• Property tax adjustments
• Title insurance

Legal fees generally range from $800 to $2,500, depending on the lawyer and complexity of the transaction.

Ways to save on legal costs:
✅ Get quotes from multiple real estate lawyers
✅ Choose a notary instead of a lawyer (if permitted by your lender)
✅ Ask your mortgage broker for recommended affordable legal services

D. Home Inspection & Appraisal Fees

While home inspections and appraisals aren’t mandatory, they are highly recommended to avoid costly surprises.

• Home inspection costs: $400 – $800
• Appraisal fees: $300 – $500 (required by lenders to determine home value)

Ways to save:
✅ Some lenders cover the appraisal cost – ask your mortgage broker
✅ Look for home inspectors offering discounts for first-time buyers
✅ Consider skipping inspection only for new-build homes with warranties

2. How to Reduce Closing Costs in BC

Now that you understand what closing costs include, let’s explore practical ways to reduce them.

A. Take Advantage of First-Time Home Buyer Exemptions

The First-Time Home Buyer Property Transfer Tax Exemption allows buyers to avoid paying PTT if:

✔ The purchase price is $500,000 or less (full exemption)
✔ The purchase price is between $500,000 and $525,000 (partial exemption)
✔ The buyer is a Canadian citizen or permanent resident

For example, if you’re a first-time buyer purchasing a $500,000 home in Surrey, you can save $8,000 in PTT costs.

B. Apply for the First-Time Home Buyer Incentive (FTHBI)

The First-Time Home Buyer Incentive (FTHBI) is a government-backed program that helps first-time buyers by covering a portion of the down payment:

• 5% assistance for existing homes
• 10% assistance for newly built homes

This reduces the mortgage amount, lowering both monthly payments and CMHC insurance premiums.

C. Utilize the Home Buyers’ Plan (HBP) for Down Payment

The Home Buyers’ Plan (HBP) allows first-time buyers to withdraw up to $60,000 from their RRSPs tax-free for a down payment.

Key benefits:
✔ No immediate tax penalties on withdrawal
✔ 15 years to repay the amount withdrawn
✔ Lower mortgage amount, reducing CMHC insurance costs

D. Work with a Mortgage Broker to Lower Closing Costs

A mortgage broker can help you reduce closing costs by:

✔ Finding lenders that offer cashback deals on closing costs
✔ Negotiating lower mortgage rates and fees
✔ Identifying special first-time buyer incentives
✔ Offering expert guidance on cost-saving mortgage products

3. Additional Strategies to Reduce Closing Costs in BC

A. Apply for the Newly Built Home Exemption

If you’re purchasing a newly built home in BC, you may qualify for a Property Transfer Tax (PTT) exemption under the Newly Built Home Exemption Program. This can save you thousands of dollars on closing costs.

✔ Full exemption if the home is priced at $750,000 or less
✔ Partial exemption for homes priced between $750,000 and $800,000

For example, if you purchase a brand-new home in Surrey for $700,000, you could save $14,000 in property transfer tax.

B. Save on GST/HST with the New Housing Rebate

When buying a newly constructed home, you are required to pay 5% GST. However, the GST New Housing Rebate allows eligible buyers to recover a portion of the tax, reducing overall closing costs.

✔ Full rebate for homes priced under $350,000
✔ Partial rebate for homes priced between $350,000 and $450,000

For instance, if you purchase a $400,000 new home in Abbotsford, you may be eligible for a rebate of up to $6,300.

C. Consider a No-Closing-Cost Mortgage

Some lenders offer “no-closing-cost” mortgages, where the lender covers some or all closing costs in exchange for a slightly higher interest rate. While this isn’t ideal for every buyer, it can be beneficial if you’re short on upfront cash.

Pros:
✅ Lower upfront expenses
✅ More money available for home improvements

Cons:
❌ Slightly higher mortgage interest rate over the loan term
❌ May not be available for all property types

4. Smart Negotiation Tactics to Reduce Closing Costs

A. Ask the Seller to Cover Closing Costs

In a buyer’s market (where there are more homes for sale than buyers), sellers may be willing to cover part of the closing costs as part of the purchase agreement.

Negotiate “seller concessions” where the seller pays a portion of:

• Property transfer tax
• Legal fees
• Home inspection costs

This tactic works best if the seller is eager to close the deal quickly.

B. Compare Mortgage Lenders for Lower Fees

Not all lenders charge the same fees for mortgage processing, legal paperwork, and administrative services. To reduce closing costs, compare lenders based on:

✔ Loan origination fees
✔ Prepayment penalties
✔ Processing fees

A mortgage broker can help you find lenders with minimal fees, potentially saving you thousands over the life of your mortgage.

5. Alternative Financing Options to Reduce Closing Costs

If upfront closing costs are a challenge, alternative financing methods can help spread out expenses over time.

A. Use a Home Buyer’s Line of Credit

A Home Equity Line of Credit (HELOC) can help buyers cover closing costs by borrowing against the equity in the home.

How it works:
✔ Access funds up to 65% of the home’s value
✔ Lower interest rates than credit cards or personal loans
✔ Pay interest only on the amount borrowed

B. Use Cash-Back Mortgages

Some lenders offer cash-back mortgages, where you receive a lump sum cash rebate after closing. This money can be used to offset closing costs.

Who qualifies?
✔ Buyers with good credit (650+ credit score)
✔ Borrowers willing to accept a slightly higher mortgage rate

6. Why Work with Satbir Bhullar Mortgages?

Navigating closing costs can be complex, and working with Satbir Bhullar Mortgages can help you find cost-saving opportunities that you might not be aware of.

Why choose Satbir Bhullar Mortgages?
✅ Expert guidance on reducing closing costs
✅ Access to exclusive lender deals & incentives
✅ Support with first-time home buyer programs in BC
✅ Personalized mortgage solutions for Abbotsford, Surrey, and nearby areas

Final Thoughts

Closing costs are a significant expense when buying a home in BC, but with proper planning, negotiation, and government incentives, you can significantly reduce your upfront costs.

By leveraging first-time home buyer programs, negotiating with sellers, and working with a skilled mortgage broker, you can make your home purchase more affordable and stress-free.

💡 Looking for ways to reduce your closing costs? Reach out to Satbir Bhullar Mortgages today!