What Are Real Estate Closing Costs for Home Buyers?
Closing costs are a hot topic in the real estate world. They're also one that can cause a lot of stress for home buyers, particularly when they don't know what to expect with who pays what and how much they'll have to pay in the first place. But today, we're going to cover everything you need to know about real estate closing costs to prevent any confusion or frustration on your part!
What are real estate closing costs?
When someone buys a home, there are a number of legal and administrative processes that need to happen to close the deal. Of course, there are also fees associated with these legal and administrative processes. And those are what we know as real estate closing costs!
How much are real estate closing costs?
Real estate closing costs are different for every single home sale. That being said, they tend to total between 1.5-4% of the home's total value. The reason the costs vary for every home is because the same administrative actions aren't needed for each sale. Other factors, including the location of the home, will also play a role.
(If you have real estate closing costs on your mind, you might also be in the process of saving for a down payment. Check out this post next to learn about the 50-30-20 and how it can help you save!)
What do closing costs include?
Closing costs in Canada consist of several components.
- Title Insurance: Typically between $100-$300, this fee protects you against any property ownership disputes
- New Home Warranty Fee: If there are any issues with a newly built home, this fee can protect homeowners from the financial fallout of any defects. Depending on the particular transaction, this fee is sometimes included in the cost of the home rather than being purchased separately.
- Real Estate Lawyer Fees: This fee tends to run around $1500 per home sale.
- Provincial Sales Tax on CMHC Insurance: If you purchase a home with less than 20% down, this is the default mortgage insurance you will need. It's included in the monthly mortgage payments. However, some provinces require provincial sales tax upfront. Mortgages are another hot real estate topic, and we answer several important questions about them in this post.
Land transfer tax (LTT) is another real estate closing cost that's worth discussing in greater detail. Many home buyers forget to account for this tax when they're considering the total cost of purchasing a home.
If you're a homebuyer in Alberta or Saskatchewan, you'll pay a small transfer fee rather than a more substantial LTT. In other provinces, the LTT rate is based on the purchase cost of your home.
Depending on your province and the value of your property, this tax can range from 0.5-5% of the total cost.
Visit this link next to learn more about land transfer taxes in different provinces across Canada.
Who pays real estate closing costs?
Finally, we get to another big question on the topic: who is responsible for paying all of these closing costs? The buyer or the seller?
Generally, the buyer pays the closing costs associated with the home. But there is one closing cost sellers cover, and that's the real estate agent's commission.
In some cases, the seller may also agree to cover the closing costs as an added incentive for the buyer.
(Do you think you might be overpaying for a home? Here are some signs to be on the lookout for)
We've covered several important points about closing costs in this post but we know you might still have more questions on the topics. Don't hesitate to get in touch with the Best Edmonton Real Estate Team to get the answers you're looking for! Click here to contact us today.
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