When you start planning ahead to buy a home, there are many things that you need to consider. It's important to create a budget that you can comfortably work with. It's also important to make sure that you have enough money put aside to cover anything, from moving expenses to closing costs. If you are on a strict budget, the last thing you want is to be hit with closing costs that you haven't planned for. Our expert Alberta mortgage broker team can offer help and advice, for example, putting 2% to 3% of the purchase of the home aside to cover those closing costs.
Lenders require that a home appraisal be done before they will accept your mortgage application. Having an appraisal work to protect the lender by making sure that the sales price of the home is in line with the market's current figures. The fee for an appraisal can be somewhere between $300 and $500, however, some lenders may offer to cover the costs.
While the appraisal helps protect the lender, a home inspection can help protect the buyer. Too often, home buyers will try to cut down expenses by cutting out the home inspection. This is something that you really shouldn't forego. A home inspection will make you aware of any issues with the home that aren't visible to the naked eye, such as foundation problems, plumbing issues, roof repairs, and mould. A home inspector knows what to watch for and having an inspection done will help you make a more informed decision. Foregoing an inspection could cost you thousands in the end, if there are major problems with the home. A home inspection will cost you about $500.
You will need to help of a lawyer when it comes to buying a home. The lawyer is the person who reviews the contract to make sure everything is as it should be, protecting you from liability and your rights as a homebuyer. Attorney legal fees can be between $500 and $1,500.
Taking out property insurance is a requirement when buying a home. Depending on whether you get the bare minimum or the whole package, property insurance protects your home contents and the home itself. Property insurance, depending on the product that you choose, can cost anywhere between $1000 and $2,500 per year.
Private Mortgage Insurance
If you are making a down payment that is less than 20% of the value of the home, you may be required to take out private mortgage insurance, also known as PMI. Mortgage insurance protects the lender in the event that the borrower is unable to make their monthly repayments and defaults on the loan. The amount that you pay depends on how good your credit score is, but it can typically be a few thousand dollars. PMI is added to your monthly mortgage repayments.
Land Transfer Taxes
This can be one of the bigger costs when it comes to closing. Land transfer tax is targeted to provinces other than Alberta and is subject to change per province. Lenders may require that you show them proof that you have enough set aside to cover this fee and your down payment. The fee that you pay can vary depending on the sale price of the home, and whether or not the home is classed as provincial or municipal. There are some situations where a homebuyer is exempt from paying the land transfer tax, such as first-time homebuyers. First-time homebuyers in Canada can qualify for a rebate funded by the government.
Property tax is a fee that all homeowners are required to pay on an annual basis. The amount that you pay will depend on where you live, the type and size of the home, and the lot that the home sits on. The fees are used for making improvements in the area where you live and cover maintenance costs. The home's listing will include the property tax amount for the previous year, which will give you an idea of the cost.
Making sure that you have enough funds to cover your closing costs is beneficial and will ensure that you can cover fees, making the home transition run more smoothly. If you have questions about closing costs that are involved with buying a home and applying for a mortgage, give our expert Alberta mortgage broker team a call today and we'll help get you started!