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Closing Costs When Buying a House

Closing, what? Closing costs. Yeah, we know. You’re already buying a property for a couple hundred thousand—no big deal—and now you have to pay to close the deal?


Along the home buying journey, it’s easy to forget that once you find a home, you’re completing a legal transaction. And like all things in the law world, there’s often a cost associated.

What Are Closing Costs?

Closing costs are the one-time costs for services completed by your lawyer, your mortgage lender, and any other third-parties that have worked on your home purchase or sale. These are the charges and fees at the end of a real estate transaction and are in excess of the purchase price of the property.

Here are a few of the closing expenses that may come up with your mortgage transaction:

  • Home inspection

  • Home appraisal

  • Legal fees to transfer title and register mortgage

  • Movers or moving trucks

  • Cleaning costs or repairs

  • Real estate commissions (if selling)

  • Mortgage penalty (if breaking your mortgage term)

  • Lenders and/or Owner’s Title Insurance

  • Property taxes

  • Land Transfer Tax (in most provinces)

How Are Closing Costs Calculated?

Will you have to pay every single one of the closing cost items listed above? No.

How much you’ll have to save for is dependent on the property you’re buying, if you’re selling a previous property at the same time, etc.

As a general rule, for purchasing a home in Alberta, you want to save about 1% of your home’s purchase price for your closing costs.

For example, if you’re buying a $400,000 home, you want to have $4,000 saved for one-time closing costs.

You may see some people recommend saving 3% of your home’s purchase, that’s not a bad general rule if you’re buying in most provinces outside Alberta where the land transfer tax is most likely your biggest closing cost. If you’re incurring a mortgage penalty or having to pay realtor fees for selling, that’s when closing costs can be even higher.

Saving For Closing Costs

We usually recommend saving this alongside your down payment, so you’re ready to move forward on your purchase when you find the house...finding a couple of thousand dollars at the last minute isn’t something most people can do. In fact, most mortgage commitments will require proof that you have these funds available beforehand.

When working with a mortgage broker, they’ll provide a list of your specific closing costs so you can save the appropriate amount. Remember, what you’ll be paying is specific to your mortgage/real estate transaction.

The key here is once the money is saved, do not spend it on anything but closing costs. Even if you think you’re not going to need the full amount you’ve saved, it’s best to be prepared. You never know what you might need come move-in day.

And who knows, maybe you’ll have some left over so you can buy furniture for the new house (after you’ve moved in, of course.)


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