What Exactly Are Closing Costs When Buying or Selling a Home

Confused about closing costs? We’ve got you covered. From insurance costs to legal fees, here’s what you need to know.

What Are Closing Costs? 

In short, closing costs are additional (generally one-time) costs and fees a buyer is required to pay upon completing a home purchase. While the exact total will vary depending on the property type, experts recommend setting aside at least one to three percent of a home’s overall sale price.

What Do They Cover? 

Closing costs may include (but aren’t limited to): 

Land Transfer Tax

Land title transfer tax is a mandatory fee paid by the buyer when property ownership is transferred (to the buyer) by the seller. Land title transfer fees in Alberta are based on both the size of your mortgage and property value. The amount is calculated as $50 plus $1 for every additional $5000 of a property’s value AND $50 plus $1 for every additional $5000 of your mortgage amount.

Estimated Cost: Use a land transfer tax calculator to determine your exact total 

Title Insurance 

This type of insurance is meant to protect buyers from incurring losses as a result of potential title and non-title related defects. Although title insurance isn’t mandatory in Alberta, it comes as a highly recommended one-time fee that protects against hidden or undisclosed problems, title fraud, easements, compliance issues and more.

Estimated Cost: $200 – $300 (average)

Legal Fees

Legal fees refer to costs associated with your lawyer’s services – generally as a result of organizing and preparing sale-related documents (including title searches, preparing your mortgage, registering your home, general administration etc.).

Estimated Cost: Minimum $500 – Your REALTOR® will be able to help you find an experienced real estate lawyer for a reasonable price.

Property Insurance 

As a mandatory requirement among lenders, home buyers must provide proof of property insurance on closing day. While the extent of coverage depends on the policy, basic property insurance is meant to cover the cost of replacing your home’s structure (in the event of a fire, natural disaster etc.). This premium may be paid either monthly or annually.

Estimated Cost: $100 per month (average), prices vary depending on coverage type

See our previous post, Insurance 101: Homeowner’s, Mortgage and Mortgage Life Insurance Explained for further insurance-related information 

Property Appraisal 

If a lender is undecided on the current market value of a property, they may require a professional evaluation. In this case, the buyer will hire an appraiser to inspect the property, providing the lender with an estimated “true” value. This reassures the lender they aren’t “overpaying” when it comes time to approve your mortgage loan.

Estimated Cost: $350 – $500 (average), though some lenders may cover the cost for you

Other Potential Costs:

• Estoppel Certificate (condos only)
• Statement of Adjustments
• Land Survey Fee
• Moving Expenses

Talk to Your Realtor®

A qualified Edmonton REALTOR® won’t just help you zero-in on the perfect home at a great price, they will guide you through the entire home buying process – including closing day. Be sure to talk an experienced agent before beginning your real estate journey, they’ll be happy to answer any questions you might have.

Looking for more helpful home buyer info? Download your free copy of our Buyer’s Guide!

Photo credits: freepik.com

Categorised in: Buying a Home, Mortgage & Financial, Selling a Home

This post was written by Terry Paranych Real Estate Group