If you're thinking of selling your house to make a little money before rising interest rates squeeze the real estate market, there's good news and bad news.
The good news is you're almost certainly making money because home prices in Canada have been rising for the past few decades, particularly in the greater Vancouver area, as shown in the chart below, which is from a BMO Capital Markets report published this week.
The bad news is: It's not as much money as you'd like.
We recently sold our income property, and I was aghast at some of the costs associated with closing. Here are some of the biggies to keep in mind, if you're going that route:
- Paying the agent. Your real estate agent and the buyer's agent share 3 per cent to 7 per cent of the selling price. That comes out of your pocket. You can haggle on the commission, though. You also have to pay sales taxes on the commission. If you decide to sell your house without an agent, you get to keep more money, but it does mean that you have to do the legwork yourself, while fending off persistent calls from agents who are waiting for you to throw in the towel.
- Paying the lawyer. You're looking at at least $500 in legal fees. There is also the cost of disbursements, such as registration fees and related expenses, which can add up to a few hundred more. And you pay sales taxes on the total, which varies depending on which part of Canada you live in.
- Paying the bank. Unless your house is fully paid off, you will have to pay a fee of as much as $270 to discharge your mortgage. (Major banks' discharge fees are listed here.) If you have a closed mortgage, your bank may also ding you for prepayment charges -- equalling several months' worth of mortgage payments, depending on the number of years outstanding and the interest rate. If you are buying another property, you may be able to transfer your mortgage.
- Paying utilities and property taxes. You have to pay your share until the deal closes. For example, if it closes in the middle of the month, you have to pay for the first half.
- Paying the government. If it's your primary residence, you're in luck and don't have to pay capital gains tax. If it's an income property, however, you have to pay tax at your marginal income tax rate on half the gains.
Here's a handy-dandy checklist that you can use.