It is required that you must provide a down payment of at least 5% when purchasing a property, however, there are some additional expenses that you need to consider for closing costs.
How Much Are Closing Costs?:
As a general guideline, you should allocate about 1.5% of the house purchase price. This can vary as sometimes it could be between 1.5%-4% when buying AND selling as it will be 2 different transactions.
For example, If you’re purchasing a property for $300,000, your closing cost at 1.5% could be $4500.
Legal Fees:
Real Estate transactions are a legal process and require a real estate lawyer to act on your behalf. Their legal fees vary from lawyer to lawyer and can range between $500-$2000.
Land Transfer Tax:
LTT is imposed on the buyer when you purchase a property. You must pay tax to the government for acquiring the property and the land it sits on. The tax amount depends on the value of your property. Luckily for the Albertans, we don’t have a land transfer tax, however, we do have a property registration fee.
The property registration fee in Alberta has two components:
- Property Value Component: $50, plus $2 for every $5,000 of purchase price (rounded up).
- Mortgage Component: $50, plus $1.5 for every $5,000 of your mortgage amount (rounded up).
Your total registration fee is the sum of the two fees above. In our calculations, we assume a 20% down payment on a $400,000 mortgage.
$400,000 – $80,000(down payment) = $320,000 Mortgage
Land Title Fee On The Property Value:
$400,000 / $5000 = 80 portions of value
$50(base value) + ($2) x 80 portion)) = $210
Land Title Fee On The Mortgage Value:
$320,000 / $5000 = 64 portions of value
$50(base value) + ($1.5) x 64 portion)) = $146
$210 + $146 = $388 will be your total registration fee tax.
Appraisal Fee:
A lender requires an appraisal to be done to determine the market value of the property when a house is purchased with a conventional mortgage (minimum 20% down payment). The cost of an appraisal is varies but it is usually around $300-$500+-.
Title Insurance:
When you purchase a house, it comes with a title. The title is a legal document that shows legal ownership of a property. If the title of a property isn’t clear, free, or transferred to your name when you take possession, problems could arise and that could cost you thousands of dollars. Title Insurance protects you against such losses. The average cost in AB is around $150-$350.