We have everything you need to know about the home buying process in our complete guide to buying a home in Alberta.
The true cost of buying a home in Alberta
Buying a home is an exciting time. Of course, a home has to feel good and work for your lifestyle, but it also needs to fit your budget.
By ATB Financial 13 January 2022 4 min read
If you’re preparing to buy a house, congrats! Buying a home is an exciting time and a huge milestone. For most of us, we buy based on our emotions, how well it meets our needs and whether or not we can squeeze it into our budget. Of course a home has to feel good and work for your lifestyle, but trying to force it to fit your current financial ability if you’re not ready isn’t usually the best plan.
If you’re going to make a home work with a tight budget, make sure you’ve thought through all of the expenses involved in buying a house up front. If you’re only working with the purchase price, your budget may burst at the seams. We’ve got you covered with an outline of the expenses to factor in when home buying.
Here’s a high level look at what to expect:
- Plan on spending about 2% of your purchase price on additional costs.
- If you have a down payment of less than 20%, another 1.25–3.15% of the mortgage amount will be added to your costs, although this is usually added to your mortgage amount.
So, if you’re buying a new home for $400,000 with a mortgage of 5% down ($20,000), you’ll have another $11,970* added for mortgage insurance. Your total mortgage will be $391,970. Then you’ll also need to budget approximately $8,000 for additional costs. And you haven’t even started to decorate.
Now let's take a closer look at what goes into these additional costs:
Costs you always have to pay
- Adjustment costs. (It varies, but budget for $1000–$2000) You’ll need to reimburse the previous owner for any utility payments or property taxes that have been paid beyond the closing date.
- Legal fees. ($1000–$2000) Lawyers will need to do paperwork. Make sure you know exactly what they’re charging you for. Keep in mind that this is an approximation—always chat with a lawyer to get the most up-to-date cost.
- Title insurance. ($300 or so) Your mortgage provider will require this. But this is good—it may save you the higher costs of a property survey.
- Property insurance. ($700 – $1,000 at closing, and then annually) Your mortgage provider usually requires you to have insurance to cover the replacement value of your home and its contents.
- Moving expenses. (It varies a lot) It could be anything from beer and pizza for your friends, to a well-insured international moving company. Figure out what your expenses will be and factor them in.
- Utility service charges. ($35 – $50 per utility) Check with your utility providers to find out what your exact moving fees will be.
If you put less than 20% down
- Mortgage insurance. (Between 1.25 and 3.15% of your mortgage amount) If you have a down payment of less than 20% of your mortgage amount, you need to insure your mortgage. This cost can be paid up front or added to your mortgage.
Costs you may have to pay
- Property appraisal. ($300–$500) Sometimes, your mortgage provider will ask you to have the property you’re purchasing appraised at your expense. It costs more if your house is very large, very unique, or very rural.
- Property survey. ($1,000–$2,000) Your mortgage provider may want an up-to-date survey. If the seller doesn’t already have one, you’ll have to pay for it. But before you do that, see if your lender will accept title insurance instead—many do.
- Home inspection fee. ($350–$600) It’s a good idea to get your new home inspected before you purchase. This can save you from very costly surprises after you move in.
- Estoppel certificate fee. (up to $100) If you’re buying a condominium or strata unit, an estoppel certificate lets you know if the previous owner has outstanding payments and the amount of interest owing on unpaid condominium contributions.
If you’re buying a brand new home (vs. one that’s just new to you)
- Goods & Services Tax (GST). (5% of purchase price) If you’re buying a new home, you will be charged GST. This is usually included in the contract price. But if the new home you’re purchasing is less than $450,000 and will be your primary residence, you may qualify for a partial rebate. Check out the Revenue Canada website or consult with a real estate accountant for more information.
- New Home Warranty. ($2,000) In Alberta, this is mandatory if you’re building a new home.
Many of the higher costs can be rolled into your mortgage, but keep this in mind when you decide how much of a mortgage you can afford. Your lender will be able to guide you through this process. Understanding the real costs of buying a house will help you find the home that’s just right for you—one that you love, and can afford.
*Based on a 25-year amortization.
You might be interested in
6 mortgage terms and tips to help you decide which mortgage option is right for you.Read article
Role of lawyer
In the home buying process, the role of the lawyer is important. Here's why.Read article
Made an offer?
A timeline of what actually happens once you've made an offer on a home.Read article