WHAT ARE CLOSING COSTS?
You must pay closing costs in Alberta in addition to your down payment. A common mistake that many make is overlooking closing costs, which can result in a hefty fee you are unprepared for. Depending on the property, closing costs usually run between 3-5% of the total purchase price.
Following are some closing costs that homebuyers should expect when buying a new home in Alberta.
Land/Property Transfer Tax
Alberta does not charge a land transfer tax, but you will be charged a property registration fee. There are two major parts to the cost: one on your home’s value and the other on your mortgage amount. Once you’ve submitted your legal documents for registration, buyers have to pay the land transfer tax at the Alberta Land Titles Office. The rates are as follows:
- Property Value ($50 base amount + $2 for every $5,000 or portion of value that equals $5,000)
- Mortgage ($50 base amount + $1.50 for every $5,000 or portion of value that equals $5,000)
Legal Fees
The lawyer takes care of a (long) list of tasks, including transferring the funds, checking the title and the real property report, clearing the title, registering the new owner on the title, etc. The legal fees will vary depending on the amount and difficulty of the work required.
Home Inspection Fee
The home inspection fee is optional, but it’s a good idea to inspect your new home to have a piece of mind. Knowing the property’s condition can save you from costly surprises after you move in. Pricing ranges from $500–$800.
Condo Documents Review
When purchasing a condominium unit, it is essential to review the documents to determine financial health, assets, renovation funds, debts and other liabilities. A seller usually provides all the documents, and a buyer can choose to review the documents or hire qualified condominium document review services for an additional fee.
Home/Property Insurance
Property insurance is often paid in monthly installments, but it can also be paid as an annual lump sum at the time of the purchase. This insurance protects against loss and damages to your property. Buyers are required to purchase this to qualify for a mortgage; otherwise, they won’t be able to gain legal ownership of the property on closing day.
Property Taxes/Adjustment Costs
You will need to reimburse the seller for any utility payments or property taxes that have been paid beyond the closing date. Property tax adjustments ensure that the buyer and seller only pay for the property taxes when they own the property. Property taxes can be paid through a lump sum payment, monthly payments to the city, or monthly payments with the mortgage payment.
HOA Fees
Some communities charge Home Owners Association fees. These fees make communities more attractive to purchasers and include planned developments and amenities for which maintenance the city is not responsible. The amounts can differ within parts of one community.
HST/GST
When purchasing a resale home in Alberta, you likely won’t need to worry about this expense. There is a 5% GST tax for a newly built home if you buy a new or substantially renovated property.
Mortgage Insurance
You need to insure your mortgage when a down payment is lower than 20% of your mortgage amount. Mortgage default insurance protects lenders when a home buyer defaults. This cost can be paid upfront or added to your mortgage.
Title Insurance
Title insurance is purchased through a real estate lawyer. It protects new owners against property disputes arising after buying a home. It is an optional expense but might save you from more fees and complications later on, and it’s different from home/property insurance.
Property Appraisal
A mortgage lender might ask you to appraise your new home. The cost can vary by location, type of survey, type of property, and geographical and legal complications.
Property Survey
A mortgage lender or provider might also require you to have a survey conducted on your property. The seller may already have had one completed, but if they haven’t, the survey will cost buyers about $1,000-$2,000. However, some mortgage lenders and providers will accept that you have title insurance instead.