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Costs When Buying and Selling a Home:

When buying a house, most people only think about costs such as what downpayment amount they can afford and what the monthly mortgage will be, and do not always consider the other necessary costs that will arise. As a result, some people face a tough couple of months financially after they purchase a home because they were not prepared for these additional costs. These costs can include:

Deposit – This must be paid when you make an offer to purchase and must be a reasonable amount.

Home inspection – An inspection can be conducted to determine any structural or functional issues with the property, which can help you determine any necessary repairs you will need to make. This will help you decide whether a change in the purchase price should be negotiated, or if you even want to purchase the property at all.

Service Fees for Mortgage Broker and Lender – If you are working with a mortgage broker, you may need to pay their fees, as well as any fees the mortgage lender may decide are appropriate. Often there is the cost of an appraisal to be paid.

Mortgage Life Insurance – Can be obtained to pay out your mortgage is paid in the event of your death. This would be in addition to your monthly mortgage payment.

Canadian Mortgage and Housing Corporation (CMHC) Fees - If you are not able to pay a downpayment of at least 20% of the purchase price, your mortgage will be classified as high-ratio and must be insured by CMHC in case of default (or thought a private mortgage insurance provider as chosen by your lender). The premiums for this vary on a sliding scale depending upon the amount of your down payment, and are paid out of the funds advanced by the lender for the mortgage, resulting in an increased principal mortgage amount owing. Generally, the smaller the downpayment the larger the insurance premium will be. The premium is blended into your mortgage, increasing your monthly payments.

Downpayment – Buyers are not able to finance 100% of the purchase price of a home. CMHC guidelines for a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion. Your specific mortgage company may require additional downpayment amounts.

Home Owners Insurance – If you are obtaining a mortgage, the lender will include a condition that you must insure your home against loss, naming the lender as the first beneficiary.

Legal Fees & Disbursements – Legal are fees charged by the lawyer to receive instructions from your lender, prepare your mortgage documents, as well as the additional documents to register the title of the property in your name with Alberta Land Titles. Disbursements are to fees, expenses, and costs associated with this registration. Disbursements will vary on all matters based on the value of the land, amount of the mortgage, status of title, etc. For example Alberta Land titles charges a flat rate of $50 plus 0.1% of the value of the land as a registration fee. They also charge the same formula base on the size of the mortgage to register a mortgage.

Property Tax Adjustment, Prepaid Utilities Adjustment – If the seller has pre-paid their yearly taxes and/or utilities, in addition to paying your pro-rated share of the current year’s taxes, you may also need to reimburse the seller for any tax credit or pre-paid taxes for the next year. Often this amount is not known at the time of purchase and only identified after the lawyer has done property tax searches.

Title Insurance – Provided by 3rd party insurance companies and may be mandatory depending on your lender.

GST – If you purchase a new home from a homebuilder or developer, GST will be charged on the purchase. You can also expect to pay GST on the fees charged by lawyers, home inspectors, surveyors, realtors and anyone else whose services you engage during the purchase process. There is currently a GST rebate on qualifying home purchases, but the rebate is only partial and is clawed back based on property value: lower priced homes are entitled to the full rebate and as the price of a home increases the rebate entitlement decreases.

Real Property Report - For Sellers, there can also be costs that were not anticipated, such as the cost of obtaining a new Real Property Report (RPR) if any permanent additions or significant reconfigurations have been made to the home, or any new permanent outbuildings have been constructed on the property. If a new RPR is required, the seller will pay for this cost, including any costs to ensure the property complies with municipal bylaws and standards.

Realtor’s Commission - Another cost which buyers and sellers must both be aware is the, which is typically a percentage of the sale price of the home. It is often paid out of the sale proceeds of the home, unless another arrangement has been made.

Other Costs – Other costs you may incur are those of hiring professional movers; connection fees for utilities such as electricity, gas, internet, etc.; landscaping the property; construction or repair of fences or decks; purchasing or replacing appliances; and ongoing home maintenance costs.

As Albertans we have had more than our share of natural disasters in recent memory. Our hearts go out to those who are now under threat from wildfires in our Province as well as in other Provinces. A donation has been made on behalf of High Level Law to the Canadian Wildfire Fund. Please consider helping out with a donation as well if you are able: https://give.redcross.ca/page/24CWFA