Introduction

Buying your first home in Edmonton is an exciting milestone, especially for newcomers to Canada. But amidst all the excitement, one thing that often catches first-time homebuyers off guard is closing costs. In this guide, we’ll break down everything you need to know about closing costs in Alberta, helping you be fully prepared when it's time to sign on the dotted line.

What Are Closing Costs?

Simply put, closing costs are the fees and expenses you need to pay when finalizing the purchase of a home. These can range from legal fees to inspection costs, and they generally add up to between 3% and 5% of your home’s purchase price. Knowing what these costs are upfront will ensure you’re not caught off guard at the last minute.

The Down Payment

The down payment is the largest upfront cost when buying a home. In Alberta:

• Homes under $500,000 require a 5% down payment.
• For homes priced between $500,000 and $999,999, you'll pay 5% of the first $500,000 and 10% of the remaining amount.
• If the home costs $1 million or more, expect a 20% down payment.

Saving for your down payment takes time and planning. Consider using a Tax-Free Savings Account (TFSA) to grow your savings tax-free.

Looking for details on all down payment options?

Mortgage Default Insurance

If your down payment is less than 20%, you’ll need to pay for mortgage default insurance. This cost ranges between 2.8% and 4% of the mortgage amount and can be added to your mortgage. While it’s an added expense, it allows you to buy a home without having to save 20% upfront.

Legal Fees

In Alberta, you’ll need a lawyer to handle the legal paperwork of buying a home. Legal fees typically range between $500 to $1,500. It’s wise to shop around and find a lawyer who offers a good rate and experience with first-time homebuyers.

Property Insurance

Before you can finalize your purchase, your lender will require proof of property insurance. This typically costs between $500 and $1,500 annually, but you can often get a better deal by bundling home and auto insurance.

Home Inspection Costs

Though not mandatory, a home inspection is one of the best investments you can make when buying a home. For a typical home in Edmonton, expect to pay between $300 to $500. A home inspection can save you from future headaches by identifying potential issues before closing the deal.

Property Appraisal

Your lender might require a property appraisal to verify the home’s value. Appraisals generally cost between $300 to $500, but some lenders include this service as part of their mortgage package, so it’s worth asking.

Title Insurance

Title insurance protects you from potential legal disputes over property ownership. This is a one-time fee that usually costs around $350, but it offers long-term protection.

Land Transfer Fees

Unlike other provinces, Alberta doesn’t have a land transfer tax, but you will need to pay a small land transfer fee. This typically ranges between $200 and $1,000, depending on the home’s value.

GST on New Homes

If you’re buying a newly built home, GST applies at 5%. However, if your home is priced under $450,000, you could qualify for a partial rebate. This can significantly reduce your costs, so be sure to discuss this with your builder or realtor.

Adjustment Costs

At closing, you may need to reimburse the seller for any prepaid property taxes or utilities. These adjustment costs can range between $300 and $500, so it’s important to budget for them.

Budgeting for Closing Costs

It’s a good idea to budget conservatively for your closing costs. Plan for costs to be on the higher end of the 3% to 5% range, just to be safe. Also, ask your realtor or lawyer for a detailed estimate early in the process so you’re fully prepared.

Conclusion

Being prepared for closing costs is a critical part of buying a home in Edmonton. By understanding what to expect and planning ahead, you’ll avoid surprises and make your home-buying experience much smoother. As always, consult with your realtor, lawyer, and mortgage broker to get personalized advice based on your specific situation.

FAQs

1. Can I roll closing costs into my mortgage?
No, in Canada, closing costs must be paid upfront and cannot be added to your mortgage.

2. Are home inspections mandatory in Alberta?
No, but they are highly recommended to identify any potential issues with the home.

3. Do first-time buyers in Alberta get any discounts on closing costs?
There are no specific discounts for first-time buyers, but Alberta offers various programs to help offset the costs.

4. What happens if I don’t have enough saved for closing costs?
If you don’t have enough saved for closing costs, your mortgage might not get approved, so it’s essential to budget carefully.

5. Can I negotiate closing costs with the seller?
In some cases, yes. You may be able to negotiate for the seller to cover certain closing costs, but this depends on the market conditions and the agreement you reach.