WHAT ARE CLOSING COSTS?

Closing costs are the fees associated with the purchase of your home that is in addition to the actual purchase price, such as legal fees and disbursements, Land Titles registration fees and moving expenses. Please note that for CMHC (Canada Mortgage and Housing Corporation) and Sagen insured mortgages, you must provide evidence of available cash for closing costs equal to 1.5% of the purchase price. This is a standard calculation and the lawyer you use will determine final/exact closing costs.

HOW ARE CLOSING COSTS CALCULATED?

Alberta has no land transfer tax. Alberta buyers pay Land Titles registration fees instead: $50 plus $5 per $5,000 of value on the transfer, and the same again on the mortgage (fee schedule in force since October 20, 2024). Confirm the exact fees with the lawyer you are using for the purchase.

LEGAL FEES

Legal fees cover a purchase and a mortgage, with additional fees if you are selling a property at the same time.

INTEREST ADJUSTMENT EXPLANATION:

The interest adjustment date is the date from which your lender actually starts calculating the interest you’ll pay. It’s basically the date on which the term of your mortgage really begins. Interest adjustment generally takes place on the 1st day of the month after the completion date. For example, if your completion date is June 20th and you choose the monthly payment frequency option please see dates:

 

• Completion date is June 20th
  
• Interest adjustment date is July 1st
  
• First full payment date is August 1st
  

 

TITLE INSURANCE/SURVEY CERTIFICATE

A bank will either require title insurance or a survey certificate. The majority of banks are now requiring title insurance and the lawyer you choose will be able to explain the differences and go over pricing.

PROPERTY APPRAISAL

The property is evaluated by a professional appraiser to determine the market value of the property. This is done on conventional mortgages (down payment is 20% or greater, private transactions and properties to be used for investment purposes. This is to ensure that:

 

• The lending institution is not over lending on the property and;
  
• To protect the borrower from over-paying.
  

 

PROPERTY INSPECTION

An inspection is a thorough evaluation of the structure, systems and components of a home. The inspection report is usually multi-paged, and comments on the condition of, but not limited to foundations, electrical, plumbing, heating, water heaters, appliances, fireplaces, drainage, roof, walls, floors, attic, crawl spaces, patios, etc. This report is for the sole benefit of the buyer and is not required by the bank.

PROPERTY TAX ADJUSTMENT

Generally, property taxes for the calendar year are due June 30. If you purchase a property before June 30th, the seller will be paying you for the days they owned the home from January 1st to the completion date. 

You then are responsible for the entire amount to be paid to the municipality on June 30th.

If you purchase a property after June 30th, you will pay the seller for the days you own the property from completion day to December 31st, as they will already have paid the entire amount to the municipality on June 30th.

To calculate this amount: one day's taxes on owner-occupied properties are the annual taxes divided by 365.

INSURANCE BINDER

This is a requirement by the bank to ensure that the borrower has arranged sufficient insurance to cover any 

losses that may be incurred on the purchase. Proof of coverage by way of an insurance binder supplied by the insurance agent is necessary.

FIRE INSURANCE

The mortgage lender will insist that you purchase an insurance policy which guarantees that, in the event of fire, the home will be rebuilt to a standard that ensures the bank’s collateral is not in jeopardy. Fire insurance is normally applicable to only houses and not strata units (ie townhouses and condos).

*PLEASE NOTE: Lenders will want proof that you have at least 1.5% of the purchase price for closing costs. This is not how much they will actually be, but rather a generic estimate. 

Every home will have different costs associated with purchasing it.

Please contact me directly for estimates on the items below.

 

• Deposit - Paid to you Realtor usually upon acceptance or subject removal
  
• Down Payment - Paid on closing date with lawyer. Minimum 5% of the first $500,000 of the price plus 10% of the portion above $500,000, up to the $1.5 million insured cap; at $1.5 million or more, 20% down is required and the mortgage cannot be insured.
  
• Default Insurance
  
• Property Tax Adjustment – Calculated by your lawyer at completion
  
• Property Tax Hold-back – If the lender is paying the property taxes on your behalf, they may require a lump sum at closing to start the property tax account 
  
• Utility Transfer fees – Natural gas, electricity, Telephone, Cable
  
• Land Titles Registration Fees - Alberta has no land transfer tax. Fees are $50 plus $5 per $5,000 of value on the transfer, and the same again on the mortgage. Refer to your lawyer for details.
  
• Appraisal Fees – May be required. The purpose is to confirm the value and condition of the home
  
• Home Inspection -Not generally a lender requirement, but strongly recommended. If deficiencies are found and a price reduction occurs, the lender may request a copy.
  
• Land Survey or  - Not generally a lender requirement, but strongly recommended. If deficiencies are found and a price reduction occurs, the lender may request a copy.
  
• House Insurance  - You will be required to arrange adequate house insurance to cover the value of your home with “loss payable” to the lender. The replacement value typically has to be supported by the purchase price. Strata-titled properties are typically covered under the Strata Corporation blanket policy however further insurance may be required.
  
• Legal Fees - A lawyer will charge you professional and disbursement fees for conducting various title searches, preparing and registering the mortgage.
  
• Life Insurance - Life insurance and/or creditor insurance is not required however it is strongly recommended that you have some type of coverage
  
• Closing Adjustments - You should expect some closing adjustments for bills that the seller has prepaid such as property taxes and utility bills. This will be settled at the time of closing by your lawyer.
  
• GST - GST applies to new construction and substantially renovated homes (not resale). First-time buyers may qualify for a rebate of up to 100% of  the GST (up to $50,000) on a new home up to $1 million, phasing out between $1 million and $1.5 million, for purchase agreements with a builder entered into on or after March 20, 2025 and before 2031.
  
• Other _____________________________________
  

 

*Closing costs are estimated only and may be higher or lower than estimated. Please contact your lawyer to verify.