When you purchase a home, one thing you will need to be prepared for are the closing costs. Closing costs are the one-time fees you will need to pay when you close on your home after the final offer is accepted and your financing is in place. Because closing costs can be more expensive than initially anticipated, it’s important to understand what they include and how they are calculated.
As a general rule, your closing costs will probably include:
Mortgage insurance
A conventional mortgage is one in which you put a 20% down payment on your home. If you put between 5% and 19% down, your mortgage is considered high-ratio and requires mortgage insurance from either the Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial. CMHC or Genworth will charge a fee for providing this insurance, which will be rolled into your closing costs to be paid upfront. In some cases, you can also add it to your loan amount.
While your Calgary mortgage broker can help you determine exactly how much it will be, you can expect to pay between 1% and 3% of the principal amount you borrowed. For example, if you have a $200,000 loan and CMHC is charging you 2% for insurance, your fee will be $4,000.
Appraisal fees
A professional appraisal of your home and property is required and is usually included in closing costs. This confirms the value of your home. Note that appraisal fees are only required for conventional mortgages. If you purchase mortgage insurance, you won’t need an appraisal.
Land transfer fees
When you purchase a home in Calgary, you are also subject to a land transfer fee when a home or property goes from one owner to another. This amount varies depending on your province and ranges from .5% to 2% of the property value and must be paid upfront at closing.
Legal fees
You are also responsible for any attorney or notary fees incurred during the purchase of your property. At the very least, this will include fees for reviewing the offer and any counter offers and preparation of mortgage documents.
Fire/property insurance
You must have proof of property insurance before you close on your home, so you will need to purchase a policy that covers the replacement value of your new home and its contents.
In some instances, particularly when the seller is motivated, you can arrange for the seller to pay some of the closing costs in the contract. Knowing what to expect for closing costs can help you budget the right amount and ensure there are no unexpected expenses when you close on your home.
