A Guide for Closing Costs in Alberta

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A Guide for Closing Costs in Alberta

Purchasing or selling a home in Alberta involves various closing costs that buyers and sellers should prepare for. This comprehensive guide breaks down closing costs in Alberta, providing homebuyers and sellers with authoritative insights on budgeting for these expenses.

What Are Average Closing Costs in Alberta?

Closing costs are the administrative fees for transferring property ownership during a home sale. They are incurred on the closing date when the sale is finalized.

Closing costs Alberta typically range from 3-5% of the home price. They vary considerably based on home price, mortgage requirements, legal complexities, and other factors. Homebuyers often pay the bulk of these costs, while sellers also face expenses like commissions.

Understanding these expenses in advance enables Alberta homebuyers and sellers to prepare adequately for closing day. Failing to budget for closing costs properly is a common mistake for first-time homebuyers.

Closing Costs for Home Buyers in Alberta

When purchasing a home in Alberta, the following closing costs may apply:

Deposit

Once the seller accepts your offer, you must provide a deposit within a specified period, usually within seven days. This deposit amount ranges from $5,000 to $10,000, whichever is less. It is later credited towards your down payment amount at closing.

Down Payment

The down payment is the portion of the home’s value you pay upfront when you close the purchase. The minimum down payment in Alberta is 5% of the purchase price. You must pay mortgage default insurance with anything less than 20% down.

The amount of your down payment impacts your borrowing costs. The more you put down, the less you have to borrow.

Legal Fees

Legal fees are paid to the lawyers required to process purchase contracts and transfer property titles. In Alberta, legal costs range from $1,000 to $2,000, depending on the real estate lawyer used. The fees cover the lawyer’s time and work on documentation.

Alberta Land Transfer Tax and Land Titles Fee

There is no land transfer tax in Alberta, but there are land title transfer fees. As of October 20, 2024, Alberta’s land transfer fees will increase.

Previously, they consisted of a $50 basic registration fee and $2 for every $5,000 of the home value. If there is a mortgage, it charges another $50 and $1.5 per $5,000 of the mortgage amount.

The new fee is $5 for every $5,000 of the home price or mortgage value, plus the same $50 fee. [Source]

Currently, no Alberta land transfer tax rebate exists, but Alberta does charge a lower property transfer tax than most other provinces.

Title Insurance

Title insurance protects you from potential title discrepancies that fail to surface during the title search process. It covers legal expenses if issues later arise with the title deed. In Alberta, title insurance costs about $300 but can vary based on property factors.

Property Appraisal Fee

The lender may request an appraisal to confirm the purchase price aligns with the property’s market value. If required, appraisal fees in Alberta generally range from $250 to $500. The cost depends on property factors like size, location, and accessibility.

Sellers sometimes pay this upfront and are reimbursed by the buyer after closing.

Property Inspection

Property inspections help identify potential issues with the property’s structure, systems, appliances, etc. While not mandatory, they provide peace of mind. Standard home inspection costs start around $400 to $600 in Alberta, depending on the home’s size and location.

Home Insurance

You must obtain home insurance (with content coverage) before taking possession, a mortgage requirement. Premiums vary based on home type, location, coverage amount and deductible. Alberta home insurance costs range from $1,000 to $1,500+ per year. [Source]

Mortgage Insurance

Since you put down less than 20% of the purchase price, you must pay CMHC insurance to protect the lender against default. Premiums vary from 2.8% to 4% of the mortgage amount, depending on your down payment.

Mortgage insurance fees can be paid upfront or added to the mortgage loan. Paying them upfront avoids interest costs.

Property Tax Adjustment

Property tax adjustment in Alberta can vary from $0 to over $3,000, depending on the annual taxes.

As a buyer, you may need to pay a property tax adjustment to reimburse the seller for property taxes they prepaid for the remainder of the current tax year after the closing date.

As a seller, you may owe the buyer for property taxes already paid for the portion of the year after the possession date.

Estoppel Certificate

If you purchase a condominium or strata, the condo corporation must provide an estoppel certificate outlining any unpaid strata fees or other arrears the seller owes. This certificate typically costs about $100 in Alberta. [Source]

Municipal Fees

When you purchase the property, municipal utility services like water, sewer, and garbage collection must be transferred to your name. This often costs around $50 per service. Check with your city about the exact utility transfer fees.

Moving Costs

How you approach your move will impact the associated costs. Hiring professional movers can cost $1,000+ but reduces hassle. Renting a truck and moving yourself with friends cuts costs but requires time and effort. Overall, moving expenses vary greatly based on the distance travelled, the amount of possessions, and the type of move.

Alberta Closing Costs for New Home Construction

Goods and Services Tax (GST)

• 5% GST on new home purchases
• Paid on possession date
• Rebate available under $350,000

GST applies when purchasing a newly constructed home in Alberta directly from a builder. The rate is 5% of the home’s value, typically built into the purchase price. [Source]

If the new home costs $350,000 or less and will be your primary residence, you may qualify for a GST new housing rebate of up to 36% of the GST paid. Speak with your accountant to determine eligibility. [Source]

New Home Warranty

• Covers defects in new construction
• Required in Alberta
• Typically costs $1,000 to $2,500

Builders must provide a new home warranty on newly constructed houses in Alberta, which adds $1,000 to $2,500 to closing costs.

This covers repairs for defects in labour and materials for up to 1 year, delivery and distribution systems for up to 2 years, the building envelope for up to 5 years, and structural components for up to 10 years. The fee varies based on factors like dwelling type and coverage amount. [Source]

What are Closing Costs for Sellers in Alberta?

Besides legal fees, appraisal fees and property tax adjustment, closing costs of selling a home in Alberta may include:

Mortgage Discharge Fee

When selling your home, you must repay your mortgage. Most lenders charge a standard discharge fee of about $100 to $200 to prepare, process, and release the mortgage documents and collateral charge. The exact fee depends on your lender.

Realtor Commissions

Real estate commissions must be paid to the listing agent and buyer’s agent. A typical commission in Alberta is 7% on the first $100,000 of the sale price and 3% on the remainder. [Source]

For example, the commission on a $500,000 home would be 7% x $100,000 ($7,000) + 3% x $400,000 ($12,000) = $19,000 total.

Home Staging

Some sellers invest in home improvements like renovations, repairs, decluttering, cleaning, and staging to increase their home’s sales appeal and value. Minor renovations often recoup more than their cost, but larger projects may not provide a worthwhile return.

Capital Gains Tax

When you sell, you may need to pay capital gains tax on any investment property profits. However, capital gains tax does not apply to profits from selling your principal residence in Canada. Speak with an accountant to understand your tax implications.

How to Minimize Closing Costs in Alberta?

When buying or selling a home, the following tips can help minimize closing costs:

• Negotiate with sellers – Ask for closing cost assistance or request specific seller-paid fees. Offer concessions if you are the seller.
• Shop around – Compare quotes from lawyers, home inspectors, appraisers, etc., to find the best service rates.
• Time closing strategically – Line up closing near the end of a month to reduce prepaid property tax adjustments.
• Leverage new mortgage incentives – Some lenders offer deals like covered appraisal fees, credited back at closing.
• Apply for rebates – If you qualify, Take advantage of the new housing GST rebate by purchasing a lower-priced new-build residence as your primary home.
• Add closing costs to mortgage – Your lender may allow you to finance certain closing costs and fees through your mortgage loan. However, this will increase your borrowing costs in the long term.

Key Takeaways on Closing Costs Alberta

Closing transactions involve various fees that home buyers and sellers in Alberta need to prepare for. Here is a summary table comparing typical closing costs for home buyers and sellers in Alberta:

Closing Cost	Paid By	Cost Range
Legal Fees	Buyer and Seller	$1,000 – $2,000
Land Title Charges	Buyer	$5 every $5,000
Property Tax Adjustment	Buyer and Seller	$0 – $3,000+
Title Insurance	Buyer	$200 – $300
Home Insurance	Buyer	$500 – $1,500 annually
Mortgage Insurance	Buyer	Premiums from 2.8% to 4% of loan amount
Appraisal Fee	Buyer or Seller	$250 – $500
Home Inspection	Buyer	$400 – $600
Estoppel Certificate	Buyer	Around $100
GST	Buyer	5% of purchase price for new builds
New Home Warranty	Buyer	$1,000 – $2,500
Municipal Fees	Buyer	Around $50 per utility
Moving Costs	Buyer	Wide range – 1,000+
Mortgage Discharge Fee	Seller	$100 – $200
Realtor Commissions	Seller	5-7% of sale price
Prepayment Penalties	Seller	Can be thousands
Utility Disconnection Fees	Seller	Around $50 per utility
Home Staging/Renovations	Seller	Can be $1,000+
Capital Gains Tax	Seller	Varies based on profit

Understanding closing costs will empower homebuyers and sellers to make sound financial decisions throughout Alberta’s real estate transaction process.

The Bottom Line

Closing costs largely depend on the purchase price, down payment, mortgage requirements, and other variables. Alberta’s costs skew towards the lower end of this range compared to other provinces without land transfer taxes.

Carefully weigh the closing costs when considering your overall budget, down payment amount, and monthly mortgage payments. Many first-time homebuyers underestimate these fees. However, an informed buyer who plans ahead and budgets adequately will be in a far better position to handle the closing process smoothly.

Ready to Make Your Move?

Our experienced mortgage specialists at Best Mortgage Online can help you navigate the mortgage process while minimizing closing costs through strategic planning, budgeting, and financing.

Reach out today to learn how we can save you money while making your homeownership dreams a reality.

FAQs on Closing Costs Alberta

Article Sources

1. Closing Costs In Alberta
2. Closing Costs Alberta

A Guide for Closing Costs in Alberta
Arthur Basco