Closing costs are expenses you incur on top of your purchase. Typically these costs run between 1%- 4% of your purchase price and while the lender does not take this funds, it is lender requirement you showing you have the funds set aside in your bank account or within your equity to cover 0.5%-1.5% of the purchase price before your closing (possession) day.
Types of Closing Costs
Inspection– most buyers will hire a professional inspector to assemble a report on the condition of the home. Typical cost is around $500.
Deposit- A deposit is required when you make an Offer to Purchase. It shows the seller you’re serious and committed to buying their property and that you have the financial means to make the purchase. It signals you’re comfortable taking on some level of risk until the deal closes. The deposit counts towards your total down payment however, unlike your down payment, there is no minimum required amount for the deposit.
Alberta land transfer and mortgage registration fees: property registration fee= $50 plus $1 for every $5000 of property value rounded to the nearest $5000. Eg. $50 + $1X property value/$5000= the fee. Mortgage registration fee is the same calculation but of your total mortgage amount- including your default mortgage insurance.
Land Transfer Tax– does not exist in Alberta but does in other provinces across Canada. It is a one time property tax fee when you purchase a home and the amount vary by province and by municipality however all are based on the purchase price of the property.
Mortgage Default Insurance premium– not typically considered part of closing costs but is required when you are putting less than 20% down. Typically most home buyers roll the default mortgage insurance into their mortgage payment rather than paying for it upfront however it still is an extra cost to consider when purchasing a home.
Legal Fees– Closing on your property will require the use of a real estate solicitor. A good estimation can be around $700 plus disbursements and adjustments so estimate $1500 for a purchase and the same or slightly less for a sale. Lender title insurance and home owner title insurance is often part of the closing cost calculations done through the lawyer as well.
Property Taxes– Property taxes are part of a closing transaction, your lawyer will take care of this as part of the closing transaction and the amounts will vary depending on the time of year when you purchase. Property taxes are also on going fees and something to consider on top of your mortgage payment.
Condo Documents and Estoppel Certificates– these fees can vary depending on the condo management company.
Appraisal Fee- An appraisal, which is an estimate on the value of your home, is often is a required expense of the buyer when a mortgage is not insured (less than 20% down) or when it is a private sale or a non-arms reach transaction. An appraisal is performed to certify the lender of the resale value of the home in the case you default on the mortgage. The cost is usually between $300 and $400.
Set up expenses/moving costs- consider expenses like utility set up, moving costs, and even your first months mortgage payment