Updated January 9, 2020
When buying a home in Alberta you need to budget for more than just your down payment – you’ll also need to account for your closing costs.
Closing costs can add up to anywhere between 1.5% and 4% of the final purchase price of the home and must be paid with cash between the time you make an offer and the day you close.
Here are some of the most common closing costs a buyer in Alberta will encounter.
When you’re ready to make an offer on a home, your agent will ask you to provide a deposit with the offer. The purpose of the deposit is to show the seller that you are serious about buying the home. It makes up part of your down payment, but may not be the whole amount. That amount must be paid when you accept and sign the Offer to Purchase, and the funds are held in trust until closing day.
Home Inspection Fee
Home inspections may be optional, but the home inspection report can offer key information that will help home buyers decide whether or not they want to purchase the home. A complete home inspection must be carried out by a registered Alberta home inspector. Since the home inspection industry is regulated in Alberta, prices for home inspections don’t vary a lot. Home inspections can cost up to $500, so make sure you account for this in your budget.
Land Transfer Fees
Alberta is lucky in the way that we don’t have to pay a land transfer tax as part of our home-buying process. However, we do have a land title transfer fee. This is calculated is by adding the fee of your property value amount and the fee of your mortgage value amount together.
To calculate the land transfer fees on both the property value and the mortgage value, you will need to use two similar, but separate, equations. For each value, $50 is a base cost, then add $1 for every $5000 value portion size.
Still hard to make sense of? To put this into perspective, say you have just purchased a home for $300,000 at a 10% downpayment. The property value will be $300,000 and the mortgage value will be $270,000.
Your property value will have a $50 base value, plus $1 for every $5000 portion the property holds. If we take $300,000 and divided it into $5000 groups, we would have 60 groups, which means we have to add $60 to the $50 base value.
Your mortgage value will follow a similar process, but for the mortgage amount of $270,000. After doing the math, we know we have 54 $5000 portions, meaning we add $54 to the $50 base value.
Now we add these two numbers together. $110 property value fee + $104 mortgage value fee = $214 land transfer tax.
Whenever you buy, sell, or refinance a property in Alberta, you need to hire a real estate lawyer to deal with all the legal aspects of the transaction. Your lawyer’s job includes conducting a title search, getting title insurance in place, registering all the documents in your name, and facilitating your final transaction.
In Alberta, you can expect to pay at least $1500 in legal fees, disbursements, and title insurance.
Additional Closing Costs to Consider
While we have listed the most common closing costs Alberta home buyers need to take into account when purchasing a home there are a number of additional costs that may arise. These costs could include:
- Reimbursement of prepaid utilities
- Reimbursement of prepaid property taxes
- Taxes or condo fees
- GST on a new home
- A new home warranty enrollment fee
- An appraisal fee
- A land survey fee
Understanding the different closing costs is an important part of the home buying process. If you’re considering buying a home then knowing about these costs will help you plan your finances accordingly. By budgeting for your closing costs ahead of time you will be better prepared for any expenses that occur come closing time.
If you have any questions regarding your mortgage or if you are thinking about getting into the real estate market, talk to one of our professionals today.