What Are The Closing Costs When Buying a Home?
Getting pre-approved for a mortgage is very important before you start your home search so you know how much you can spend on a home - but you also need to be prepared for the closing costs as well!
An accredited appraiser may be required by the lender to assess the value of your new home to verify the market value of your purchase as part of securing the mortgage.
Condo Document Inspection
If you are purchasing a condo, then there will be a large number of documents that you must carefully review. You can hire a condo document review company who can review all the documents and provide you with a report, they charge anywhere from $300-500.
A deposit is required when you have an agreed upon offer to purchase a home, and it must be paid as a sign of good faith that you will purchase the home. You get the funds back if you do not waive conditions and do not wish to proceed with the purchase of the home. If you waive conditions and proceed with the purchase, then the deposit forms part of the down payment.
It is important to discuss if GST applies to your home purchase with an accountant. That said, generally there is no GST on resale homes in Alberta. If it is a new built home, then GST will apply.
Most homeowners choose to have a home inspection completed, it could be the best $400-$700 you spend! A certified home inspector will look for problems in the home, and give home maintenance tips. You will receive a detailed report highlighting any concerns in the home, things you may want to do in the future, and sometimes links to products that the inspector mentions during the inspection.
It is very important to have the right insurance policy for your home or condo. If you are going to rent out your home, you still need insurance ! And your lender may require you to produce proof of insurance, so it is a good idea to do your research early. Talk to a qualified insurance broker for what provider and insurance package is right for you.
Land Transfer Fee
Unlike most provinces in Canada, there is no land transfer tax, but buyers will pay a small fee which can be a few hundred dollars.
A real estate lawyer will be required in order to purchase a home. Legal fees can vary depending on your purchase price and mortgage amount, but can be anywhere from $1200 to $1600.
If you want to purchase a home with a down payment of less than 20%, then you will be required to get mortgage insurance. This insurance is to protect the lender in case the borrower defaults on the mortgage payments. The most common insurer is CHMC, which is a Crown Corporation; but there is also Canada Guaranty and Sagen (formerly Genworth Canada). Talk to your mortgage advisor about the current rates for mortgage insurance.
Property Tax Adjustment
If the seller paid for property taxes in advance, they will get that money back and you will pay for the property taxes starting on the day you take possession. Your lawyer will review this with you at the time of closing.
This insurance will protect you against challenges to the ownership of your home from problems relating to title of your home, such as title fraud. Your lawyer can review this insurance option with you.
Utilities Connection Charge
Some utilities may require a move in or connection fee. They may also charge a deposit if you have not had utilities with them in the past.
Additional Possible Inspections
Depending on the type of property, there may be additional inspections you may want to have completed. These could include:
- electrical inspection
- engineer’s report
- environmental and mold inspection
- furnace and chimney inspection
- gas line inspection
- septic/sewer inspection
- well and/or water quality/quantity test
- professional square footage measurement report
- roof inspection